Agriculture Secretary Sonny Purdue kicked off World Dairy Expo in Madison this week, telling dairy farmers they will have to adapt to survive. He said “It’s very difficult in the economy of scale, capital needs, all of the environmental regulations and everything else to survive milking 40, 50, 60 or even 100 cows.”

 HighGround Dairy’s Lucas Fuess reported in the Oct. 7 Dairy Radio Now broadcast that it was difficult to hear that sentiment but it is reality and “a wakeup call to make sure farmers are doing everything they can to keep costs down and continue to be competitive.”

He said the sentiment was better at Expo this year, due to the rise in milk prices, and says HighGround has a good outlook the next few months which “hopefully will save some of the struggling dairies.” He said it was interesting to compare the Secretary’s comments to some of the programs contained in the Farm Bill as HighGround believes smaller dairies can benefit greatly from some of them such as the Dairy Revenue Protection and newly named Margin Insurance programs.

Fuess sees continued tariff challenges on the horizon such as the latest battle with the EU and with China, even as trade officials meet Oct. 10 in Washington. “Hopefully some tariff resolution will come soon,” he concluded, “And be able to increase U.S. dairy exports, push that milk price a little higher, and stop some of the struggles that these small dairy farms are seeing.”

Fuess’ EU reference regarded a ruling by the World Trade Organization which allows the U.S. to implement tariffs on $7.5 billion of imports from the EU in response to its subsidies of Airbus. The U.S. Trade Representative stated that a 10 percent tariff will be levied on European aircraft and 25 percent on agricultural goods including butter and cheese, as well as industrial products and other imports.

Meanwhile, the weighted average of products offered in Tuesday’s Global Dairy Trade auction (GDT) inched 0.2 percent higher, following the 2.0 percent jump on Sept. 17. Sellers brought 85.4 million pounds of product to the market, up from 82.3 million in the last event.

You’ll recall that preliminary data showed August 50-State milk output at 18.3 billion pounds, up just 0.2 percent from August 2018. The August Dairy Products report shows that more milk went to the cheese vat. Total cheese output hit 1.11 billion pounds, up 1.6 percent from July and 2.2 percent above August 2018. Year-to-date output is at 8.68 billion pounds, up just 0.9 percent from a year ago.

Butter output fell to 136.4 million pounds, down 6.1 million pounds or 4.3 percent from July but was 2.8 million pounds or 2.1 percent above a year ago. YTD butter is at 1.28 billion pounds, down 0.8 percent from 2018.

Yogurt output, at 362.6 million pounds, was down 8.5 percent from a year ago, with YTD at 2.9 billion pounds, down 3.1 percent.

Dry whey totaled 84.5 million pounds, down 1.9 percent from July but 7.2 percent above a year ago, with YTD at 637.4 million pounds, down 8.8 percent. Stocks totaled 72.4 million pounds, up 7.1 percent from July but 1.8 percent below those a year ago.

Nonfat dry milk output totaled 132.2 million pounds, down 21.4 percent from July but 2.8 percent above a year ago. YTD powder is at 1.3 billion pounds, up 1.7 percent from 2018. Stocks fell to 269.8 million pounds, down 18.9 million or 6.5 percent from July and were 10.7 million pounds or 3.8 percent below the 2018 level.

Skim milk powder climbed to 51.4 million pounds, up 14.7 million or 40.0 percent from July and was 3.8 million or 7.9 percent above a year ago. YTD skim hit 324.7 million pounds, down 14.2 percent from a year ago.

Weaker butter prices are being offset by firming nonfat dry milk prices, according to FC Stone, which are leaving Class IV prices in a holding pattern for now. “U.S. powder continues to find underpinning support principally in global demand that seems to be improving by the week lately.”

The whey market is heavily influenced by African swine fever which has devastated the world’s largest hog herd, namely China. The Daily Dairy Report’s Sarina Sharp wrote in the Sept. 27 Milk Producers Council newsletter that “Amidst sky-high pork prices producers are surely looking to boost production. They are investing in piglet health which would likely boost whey purchases.”

Finances on U.S. dairy farms continue to improve. A higher All Milk price and lower feed prices nudged the August milk feed price ratio higher for the second month in a row. The latest Ag Prices report put the ratio at 2.26, up from 2.16 in July and compares to 2.06 in August 2018.

The views and opinions expressed in this column are those of the author and not necessarily those of Farm World. Readers with questions of comments for Lee Mielke may write to him in care of this publication.