The Feb. 6 Global Dairy Trade auction (GDT) saw yet another boost in its weighted average of products offered, this time jumping 6.7 percent, following a 4.2 percent rise Jan. 15 and 2.8 percent on Jan. 2. It was the fifth consecutive session of gain and the highest since Nov. 1, 2016. Sellers brought 51.4 million pounds of product to the market, down from 61.5 million on January 15 and the lowest amount since June 19, 2018.

All products offered except buttermilk powder were in the black, led by rennet casein, up 10.9 percent. Whole milk powder was up 8.4 percent, following a 10.3 percent boost in the last event. Anhydrous milkfat was up 5.8 percent, following a 3.2 percent gain, and butter was up 4.2 percent after seeing a 4.6 percent gain. Skim milk powder followed, up 3.9 percent after it led the gains last time with a 10.3 percent boost. GDT Cheddar was up 1.4 percent, following a 4.2 percent rise, and Lactose brought up the bottom, up 1.3 percent.

A number of Midwestern cheesemakers suggest that demand is seasonally slow, says Dairy Market News. “Plant breakdowns and weather-related issues caused some extra milk to move into cheese production, below Class price in most cases. Reported spot milk prices ranged from flat Class to $2 under. Cheese inventories have become burdensome in slower moving varieties, but a number of contacts suggest their inventories are balanced. Overall cheese production mirrors milk availability, but in some cases production schedules have been pared down in order to manage inventories,” says DMN.

Western cheese inventories, like most of the country, remain long yet industry contacts say domestic retail and food service demand is relatively steady. While buyer interest has picked up due to lower prices, exports have yet to take off. Market participants hope the lower prices will generate buyer activity and draw down cheese stocks though a few cheese makers say their inventories are in balance. Many manufacturers are running full schedules but some are starting to ease back on production and diverting milk intakes toward Class IV uses.

DMN says Central region butter churning is on par with cream availability. Plants continue to build stocks for later in the year and cream supplies are readily available with more offers coming from the West. Demand is also on par with last year, meeting expectations, but the butter remains range-bound and steady.

Global powder prices are particularly relevant in 2019, according to Western United Dairymen’s Annie AcMoody, and even more so than in recent years. Writing in her Feb. 1 newsletter, she points out that in October 2018 (the latest data available), 82 percent of U.S. powder was exported. The average since the beginning of 2018 is 70 percent. When such a big portion of a product is exported, international pricing matters for our competitiveness.”

FC Stone points out in its Feb. 12 Early Morning Update that “Fundamentals do not look great for powder as New Zealand sits on record inventories, Mexico has slowed down while also canceling tenders, and the U.S. will be in flush in just a couple months.”

The U.S. is not benefiting as much from the strengthened global dairy market. HighGround Dairy’s Lucas Fuess reported in the Feb. 11 Dairy Radio Now broadcast that the U.S. has been “put on the sidelines” due to continuing trade concerns and November’s trade data was a bit troubling for a variety of products.

The Agriculture Department announced that it will purchase 5.5 million gallons of fluid milk as part of the trade mitigation package the Trump Administration announced last fall as a result of the ongoing tariff war. This is the equivalent of 47 million pounds of milk or 1.6 million pounds of cheese per month over the April, May, and June period, according to Fuess, who warned that, while this is encouraging, “It remains to be seen how the spring flush turns out with these continuing troublesome margins across the U.S. and how this will affect overall supplies this spring.”

 He adds that the November Dairy Products report’s message is, “There’s still plenty of milk in this country overall and plenty of product, if not in production, then in dry product stocks.”

The USDA issued its latest World Agricultural Supply and Demand Estimates (WASDE) report on Feb. 8. The report was not issued in January due to the government shutdown. The 2018 milk production estimate was lowered, based on available data through December. The 2019 forecast was reduced on lower expected first-half dairy cow numbers and continued slow growth in milk per cow.

It will take a lot more good news than that to stop the loss of U.S. dairy operations. The Daily Dairy Report’s Sarina Sharp wrote in the Feb. 1 Milk Producers Council newsletter that “In the week ending Dec. 22, dairy producers sent 69,568 cows to slaughter, the highest total for any week since January 2013. The total may have been especially high as dairy producers rushed to get their cows in ahead of the holidays, but it is massive nonetheless. Slaughter was particularly high in the West, which aligns with a pronounced increase in herd dispersals in the Pacific Northwest in December.”

Meanwhile; USDA’s latest Dairy Products report shows more milk went to the cheese vat and less to the dryer. November cheese output totaled 1.08 billion pounds, down 4.3 percent from October but up 1.0 percent from November 2017. Year-to-date output hit 11.8 billion pounds, up 2.5 percent from a year ago. November became the 68th consecutive month that cheese output exceeded that of a year ago.

Yogurt output hit 319.0 million pounds, up 0.4 percent from a year ago, with YTD output at 4.0 billion pounds, down 2.0 percent.

Dry whey totaled 74.7 million pounds, up 8.6 percent, with YTD at 933.5 million pounds, down 1.8 percent. Dry whey for human consumption totaled 73.0 million pounds, down 14.5 percent from October and 8.6 percent below a year ago. Stocks totaled 63.9 million pounds, down 11.4 percent from October and 35.1 percent below those a year ago.

In politics, the National Milk Producers Federation and the U.S. Dairy Export Council announced support for what was called “bipartisan, bicameral legislation to reform a powerful White House trade tool to ensure it is used as intended by Congress to respond to genuine national security threats.”

“Rolling back current retaliatory tariffs and keeping others from forming in the future is the dairy industry’s top trade priority,” a joint press release stated. “America currently sends 16 percent of its dairy production overseas, and industry officials see a lot of room for expansion in the future.”

The Trade Security Reform Act aims to change the process by which the Administration imposes Section 232 tariffs. The legislation tighten Section 232 rules to ensure it is only used for true national security purposes while taking into consideration a number of economic and security concerns.

“Dairy prices have steadily fallen since Mexico imposed its tariffs, harming farmers,” said Jim Mulhern, president and CEO of the NMPF. “Exports to our most important market are being threatened, hurting dairy businesses and the thousands of Americans they employ.”

Tom Vilsack, chairman and CEO of the USDEC stated; “Agriculture is being hurt by retaliatory tariffs; the bill’s sponsors should be applauded for finding a common-sense process to a complex issue. It protects one of the president’s tools to combat threats to our national security while allowing for the full consideration of true safety and economic factors at play.”

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