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Milk Production Estimate Raised for 2019

The Agriculture Department again raised its 2019 milk production estimate in the latest World Agricultural Supply and Demand Estimates report, based on higher cow numbers and stronger growth in milk per cow. The 2020 forecast was upped from last month based on expected continued gains in milk per cow.

2019 production and marketings were estimated at 218.2 and 217.1 billion pounds respectively, up 200 million pounds from last month’s estimate on production and 100 million higher on marketings. If realized, 2019 production would be up 600 million pounds or 0.3% from 2018.

2020 production and marketings were estimated at 221.6 and 220.5 billion pounds respectively, up 400 million and 300 million pounds respectively from last month’s estimates. If realized, 2020 production would be up 3.4 billion pounds or 1.6% from 2019.

Annual forecasts of imports on both a fat and skims-solids basis were unchanged for 2019 reflecting current trade data, but forecasts for 2020 were lowered as the recently announced additional tariffs on a number of EU dairy products are expected to result in reduced imports.

Fat basis export forecasts for 2019 and 2020 were reduced on continued competitive pressure on U.S. cheese exports. The 2019 skim-solids basis export forecast was lowered on weaker expected exports of cheese and skim and nonfat dry milk. However, increased strength in SMP/NDM sales in 2020 due to strong global demand is expected to more than offset continued weakness in cheese exports.

Cheese and NDM prices for 2019 were raised but forecasts for butter and whey were reduced. The Class III milk price was raised from last month as the higher cheese price more than offsets the lower whey price. Look for the 2019 Class III to average 16.55 per hundredweight, up a dime from last month’s estimate and compares to $14.61 in 2018 and $16.17 in 2017. The 2020 average is now pegged at $17.20, up 15 cents from last month’s projection.

The Class IV price was raised as the higher NDM price more than offsets the lower butter price. It is estimated to average $16.20, up a nickel from a month ago and compares to $14.23 in 2018 and $15.16 in 2017. It’s projected to average $16.10 in 2020, down a nickel from last month’s estimate.

Cheese and NDM prices for 2020 were raised from the previous month, but the price forecast for butter was reduced. Whey was unchanged. As a result, the Class III price forecast is higher, but the Class IV price was lowered, as the higher NDM price is more than offset by the lower butter price.

Cash cheese prices shot higher the second week of October though traders are skeptical. FC Stone stated in its Oct. 10 Early Morning Update: “Logic and reason do not drive these markets. Greed and fear do.”

Midwestern cheese producers continue to report positive sales for the most part, says Dairy Market News. Spot milk is ranging around $1 over Class. A majority are primarily using internally sourced milk so production is steady to active.

Western cheese makers describe demand as adequate but not stellar. End users are generally not interested in taking extra loads with market prices at $2 and prefer to work through inventories, buy only as needed, and delay larger purchases until after the holidays, when they hope prices ease back. Export sales are challenging as international buyers can find cheese at lower prices in other markets. Domestic retail accounts, food service, and pizza sales are engaged enough to keep U.S. cheese moving and market prices supported. Western manufacturers report cheese production is running full and, while they would like sales to be livelier, the deals are able to keep inventories in check.

The U.S. Dairy Export Council reports that U.S. dairy export value was nearly $3.92 billion in the first eight months of 2019, up 3% from last year and the highest figure in five years. Gains were led by increased volumes of cheese as well as higher selling prices for dairy ingredients.

Credit domestic demand and short milk supplies for the strong U.S. cheese prices. Cheese exports were at a nine-month low in August, according to the Dairy and Food Market Analyst which cited shipments to Mexico being at an 11-month low and to Japan at a 35-month low. The DFMA stated: “Japanese buyers tend to purchase six months in advance or more. This is the beginning of a trend.” Hopefully, the new U.S.-Japan trade agreement will change that.

The DFMA also pointed out that, in total, the U.S. exported 14.0% of its milk solids in August, only slightly above the 13.7% shipped in June and July.

HighGround Dairy says cheese exports were down 4.0% from July and 5.9% below August 2018. Nonfat dry milk and skim milk powder exports were up 3.0% from July but 18.3% below a year ago.

Cheese imports were the highest in nine months and the largest August volume since 2015, says HGD.

August EU imports, at 28.9 million pounds, were the strongest on record, up 17% versus 2018. HGD says “The industry has been anticipating the EU cheese tariffs and started to stockpile imports before they were expected to be implemented into October, which means September imports will be strong as well.”

HGD adds that “The U.S. is the EU’s biggest market for both cheese and butter exports outside of their domestic market and tariffs will have a negative impact internally, albeit slight.”

Lastly, this past January at its 100th annual meeting, the American Farm Bureau recommended to the Board of Directors that the organization convene a Farm Bureau and producer led coalition to review methods to restructure and modernize the current Federal Milk Market Order System.

Bob Gray reported details in his Oct. 4 Northeast Dairy Farmers Cooperative newsletter stating that the AFBF is proposing that milk price discovery methods be expanded and modernized, the elimination of bloc voting provisions, an update in the method of calculating make allowances and specific changes to Federal Order provisions in the southeastern states.

In its 16-page summary, AFBF notes that it has been 20 years since Federal Orders have undergone major revisions. In that time, dairy farm numbers have dropped nearly in half, fluid milk utilization has dropped by nearly 30% but consumption of other dairy products has risen nearly 10%. By 2030, U.S. milk production is expected to climb to 250 billion pounds annually.

Source: Leader Telegram

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