Milk Price Hits Five-Year High Point
Published: Friday, December 13, 2019
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
The Agriculture Department announced the November Federal order Class III benchmark milk price at $20.45 per hundredweight last week, up $1.73 from October, $6.01 above November 2018, and the highest since October 2014.
That is the peak for 2019. Last Friday morning Class III futures portended a December price at $19.48, January 2020 at $18.57; February, $17.77; and March at $17.35. January was the peak, with the bottom at $17.19 in May.
The 11-month Class III price average is $16.74, up from $14.69 at this time a year ago and $16.24 in 2017.
The November Class IV price is $16.60, up 21 cents from October and $1.54 above a year ago. Its average stands at $16.26, up from $14.15 a year ago and $15.31 in 2017.
The second to last Global Dairy Trade (GDT) auction of 2019 ended five consecutive sessions of gain. The Dec. 3 weighted average was down .5 percent, following a 1.7 percent rise Nov. 19 and 3.7 percent on Nov. 5.
Anhydrous milkfat and butter led the declines, down 5.1 percent and 4.9 percent, respectively, following respective losses last time of 1.5 percent and 1.3 percent.
Rennet casein again led the gains, up 4.9 percent, which follows a 5.6 percent gain last time. Cheddar was up 2.7 percent, following a 2.5 percent rise, skim milk powder was up 1.9 percent, after a 3.3 percent rise, and whole milk powder inched up .1 percent, after rising 2.2 percent.
FC Stone equated the GDT 80 percent butterfat butter price to $1.7626 per pound U.S., down 3.4 cents from the last event. CME butter closed last Friday at $1.9150. GDT Cheddar cheese equated to $1.7224 per pound, up 4.4 cents and compares to last Friday's CME block Cheddar at $1.97. GDT skim milk powder averaged $1.3918 per pound and compares to $1.3683 last time. Whole milk powder averaged $1.5108, up from $1.5063. CME Grade A nonfat dry milk closed last Friday at $1.2675 per pound.
In other trade news, HighGround Dairy (HGD) reports that October saw the third highest nonfat dry milk exports on record for the U.S., reaching 18-month highs. Shipments to Mexico were notable but fell slightly. The largest jump was to Indonesia and nonfat shipments to New Zealand also reached an all-time high.
October cheese shipments, at 62.6 million pounds, were up 5.5 percent from October 2018 and a record high for the month with shipments to Mexico up 29 percent and represented 16-month highs to the country. Volumes dropped to South Korea, Australia and Japan however. Cheddar exports fell below a year ago, but there was an increase in product moving to Mexico, up 115 percent, according to HGD.
Dry whey worsened with October exports the lowest since June 2004, down 23.4 percent from September and down 40.1 percent from a year ago. "On trend with recent market expectations," HGD said "losses to China remain high."
Meanwhile, Reuters reported that President Trump announced that he would restore tariffs on U.S. steel and aluminum imports from Brazil and Argentina in apparent retaliation for currency weakness he said was hurting U.S. farmers.
Trump also stated last week that it may be best to wait until after the election to complete a trade deal with China, setting the trade teeth on edge. Word was that China is in the process of waving retaliatory tariffs on U.S. agricultural products, which would be a wonderful Christmas gift to U.S. soybean farmers in particular.
The Office of the U.S. Trade Representative says an investigation has found that France's tax on digital services "unfairly discriminates against big U.S. tech companies," according to Politicol. The Trump administration has threatened to impose tariffs on up to $2.4 billion worth of French goods, including cheese.
USDEC President and CEO Tom Vilsack remains optimistic on 2020 dairy trade, despite the trade policy challenges with China and other markets, according to a Dairy Foods Magazine interview. Vilsack cited the interim U.S.-Japan trade agreement and the anticipated passage of the U.S.-Mexico-Canada agreement and said the USMCA will provide greater access to those markets while new initiatives in Southeast Asia and elsewhere will "elevate U.S. dairy's presence overseas and build demand."
He acknowledges there are challenges, such as the current trade disagreement between the U.S. and China and efforts by the European Union to restrict common food names but "USDEC's efforts to address those challenges are wide-ranging and aggressive," Vilsack said.
Executives from North America's largest dairy companies traveled to Washington last week to personally urge members of Congress to pass the USMCA. The effort was organized by the International Dairy Foods Assn.
Unfortunately, Bob Gray reported in last week's Northeast Dairy Farmers Cooperatives newsletter that the Mexican Trade Minister met with the House leadership to finalize outstanding issues but, after returning home, the Mexican government stated that they could not accept a demand by the House leadership that the USMCA include the right for the U.S. to send inspectors into Mexico to ensure that labor enforcement requirements were being adhered to. Passage now seems unsure at best, according to Gray.
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