FC Stone’s Dave Kurzawski warns that “Although American cheese holdings saw a nice drawdown in February, it’s the increase in Italian style (mostly mozzarella) holdings that have us concerned. Our estimated domestic mozzarella sales were very strong during the second half of 2018 and that was helping to keep milk out of Cheddar/American production. But it looks like those sales had slowed in January and it now looks like February was slow as well. If mozzarella sales remain weak, it could push more milk back toward Cheddar production in coming months which would be bearish for prices,” he warned.

Meanwhile; the Daily Dairy Report’s Sarina Sharp wrote in the March 22 Milk Producers Council newsletter that “Firm demand, slowing global milk output, and tightening stocks suggest that the worst of the dairy downturn is finally in the rear-view mirror. Near-term milk prices are far from exciting, but they are much better than where they were. Given the depth of the pain the industry has suffered over the past four years, the upcoming rally is likely to have considerable staying power. Dairy producers simply lack the appetite and the equity to significantly expand as milk prices recover,” Sharp concludes.

Dave Kurzawski echoed some of that positive sentiment in the April 1 Dairy Radio Now broadcast and it was no “April Fool’s joke.”

He reported that January exports of U.S. Cheddar cheese were up 57.3 percent from January 2018, though mozzarella exports were a little weaker than a year ago but he blamed existing tariffs as part of the reason as “certain cheeses going to Mexico are dinged a little higher.”

Trade disputes continue to affect exports although exporters have been growing sales in countries other than China and Mexico offsetting some of the blow.

“The overall take-away,” says Kurzawski, “is that demand in January was quite robust for cheese and probably worked its way in part to the U.S. spot cheese market rally that we have seen over the past couple weeks.”

Butter exports were also strong, up 9.2 percent, but nonfat dry milk was off almost 2 percent. He quickly added that he expects those exports to increase once we get past the second quarter.

The other factor is that imports were down. “We took in less in the U.S. and we’re exporting a little bit more,” he said, “The net effect is increased milk prices.”

As to where the top is in cheese prices, Kurzawski hesitated but warned that we could see some price weakness going into April because “There is cheese out there and some milk, but cull rates are really strong and the milk is probably not going to be as robust in the second quarter as we have seen in previous years.”

Another wild card as to what lies ahead is the record flooding that hit Midwest farmers hard. Impacts on livestock and crop plantings are yet to be seen.

Milk is in good balance with processing needs, with a few more spot milk loads available. Prices ranged from $1 above to $1.25 under Class but cheesemakers have mixed feelings on taking on extra milk, says DMN, with some content to use only their own patron’s milk or the milk they normally receive from current agreements. They also desire to keep inventories capped. Others will take on milk, especially if it can be matched to an extra cheese order. Bottom line; cheese market prices are infusing a dose of uncertainty into the market.

Central region cream is readily accessible to most butter makers, according to DMN, but Class II and other users are actively drawing cream as well and cream is expected to tighten a bit. Butter manufacturing varies, depending on locations. Butter orders are flat to increasing as requests for the upcoming holiday are being placed. Inventories are adequate to satisfy all buyers' needs, says DMN.

African swine flu in China, the worst outbreak it has seen in many years, has resulted in the culling of close to a million pigs. That has also resulted in lower U.S. exports of whey to that country. China imported 19.5 percent less whey in February than a year ago and the U.S. supplied a good part of that.

In other trade news; while the future of President Trump’s U.S.-Mexico-Canada, free trade agreement remains uncertain in a divided U.S. House of Representatives, the Toronto based North American Affairs Manager of the Consumer Choice Center (CCC), David Clement called on the Canadian government to give it a thumbs down.

A CCC press release stated “The Federal Government's 2019 budget has allocated $3.9 billion in support for Canada's supply managed industries (dairy, poultry and eggs). Specifically, the bailout is supposed to help supply managed farmers deal with increased competition as a result of Canada's trade deals.”

Clement called the multi-billion dollar bailout "a slap in the face for consumers, and for tax payers. Supply management is a heavily regressive policy that inflates prices to the point where it costs Canadian families up to $500 more per year for groceries. We know that these artificial prices push nearly 189,000 Canadians under the poverty line, and we know that the best peer reviewed research out there states that eliminating supply management would be a net benefit for Canadian consumers, and Canadian farmers.”

“It is unfortunate that Budget 2019 makes maintaining supply management significantly worse, by devoting taxpayer funds for an industry that is already heavily protected from competition. The bailout is nothing more than corporate welfare, ripping Canadians off as consumers, and as taxpayers," said Clement

Things aren’t coming together very quickly in the U.S. trade spat with China either and the threat of additional tariffs hangs over ongoing discussions between the two super traders.

HighGround Dairy reports that "Throughout the first two months of 2019, China has imported 622,198 metric tons or 1.4 billion pounds of milk powders, whey, lactose, infant formula, butterfat, fluid milk and cheese, an all-time high to start the year. The EU has consistently accounted for 24 percent of market share over the past three years throughout that timeframe while New Zealand jumped to 60 percent in 2019, the highest reported in four years."

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.