A lot of eyes are on China’s African Swine Fever (ASF) outbreak which is ravaging their hog industry. FC Stone estimates that China buys close to 880 million pounds of whey permeate per year to feed their massive herd. It adds that China equates for over 50 percent of hog production in the world and estimates their feed demand is down conservatively by 30 percent.

“The evidence is clear if you look at the sharply negative soybean crushing margins in China,” reasons FC Stone in its April 8 Early Morning Update. “In one of the most intensive hog production regions in China, Shandong, our colleagues estimate that feed demand is down by a shocking 50 percent.”

 “It’s short-sighted to think that there’s only been one case of ASF made public by Chinese officials in the Shandong region,” FC Stone concludes.

Meanwhile, the April 8 Daily Dairy Report updated details of New Zealand’s efforts to eradicate Mycoplasma bovis, the first effort of its kind in the world. The DDR says the disease does not infect humans and poses no food safety risk but affects animal welfare and reduces productivity.

The DDR says New Zealand initiated its eradication effort in July 2017 and, as of the week of April 1, testing identified 161 farms with animals positive for the bacterium, including 75 with dairy cows, 62 with beef animals, and 24 others. The DDR says “The New Zealand Biosecurity Act of 1993 calls for these farms to be completely depopulated of cattle, cleaned, and disinfected. Currently, 103 farms have completed the eradication process and 58 are still actively engaged. Over 311,000 tests have been completed and over 91,000 cattle have been culled.”

Cooperatives Working Together (CWT) members accepted four offers of export assistance from CWT the week of April 8 to help capture sales of 253,532 pounds of Cheddar cheese, 661,387 pounds of butter, and 220,462 pounds of whole milk powder. These products will go to customers in Asia and the Middle East and will be delivered from May through August 2019.

The sales raised CWT’s 2019 exports to 25.67 million pounds of American-type cheeses, 3.47 million pounds of butter (82% milkfat) and 22.4 million pounds of whole milk powder to 22 countries in six regions. The sales are equal to 478.4 million pounds of milk on a milkfat basis, according to the CWT.

The big news in trade this week was President Trump threatening a new round of tariffs on Europe and the EU. FC Stone points out that 76 percent of US cheese imports last year came from Europe, about 293 million pounds. “The proposed tariffs would actually impact about 72 percent of cheese imports from Europe, so that nets out to increased tariffs on about 55 percent of US total imports,” says FC Stone.

“Butter seems to be a bit more straightforward as all of US imports from the EU would be hit by tariffs and the EU accounted for 88 percent of total butter imports last year, or about 72 million pounds. To give us some perspective butter imports from the EU last year accounted for nearly 4 percent of US consumption while the impacted cheese imports were only 1.7 percent of total cheese consumption. While it may be too early to gauge the impact, your charcuterie trays and imported wines will likely get a bit more expensive,” warns FC Stone.

One more bit of news this week, the USDA announced another bid for 2.7 million pounds of processed American cheese as part of the Administration’s “trade mitigation” program. The bids will be due April 24 and the delivery period will be from July 1 to Sept. 30, 2019.”

The Agriculture Department lowered its 2019 milk production estimate for the fifth consecutive month in its latest World Agricultural Supply and Demand Estimates report issued April 9 “as higher milk cow numbers are more than offset by lower expected growth in milk per cow for the year.”

2019 production and marketings are now estimated at 219.5 and 218.6 billion pounds respectively, down 200 million pounds on both from last month’s estimate. If realized, 2019 production and marketings would be up just 1.9 billion pounds or 0.9 percent from 2018.

DMN reports that spot milk price averages were steeper on average this week. Some cheesemakers sold extra milk back to the market but there is plenty of it for cheese and some producers are running 7-day weeks. Demand continues to increase steadily for most cheese producers, while others relay April and May orders are booming. Cheese inventories in the region are generally in “a good place,” while nationally they remain a concern.

Jerry Dryer, analyst and consultant with JDG Consulting, says cheese prices popped higher earlier than he expected this spring, in the April 15 Dairy Radio Now broadcast, although he warned the price could slip due to the spring flush, which USDA says is occurring in parts of the West and Southern Central regions.

Dryer upped his second quarter Class III price forecast by $1 per hundredweight from where it was a month ago, he said, and added 35 cents to his third quarter projection but explains “It’s not so much a result of sales because we still face the tariffs on exports and domestic sales are nothing to write home about, but the supply is tightening up, the lower prices are having their impact.”

He projects the cheese price to be around $1.75 per pound by October and will average about $1.61 for the year, up from $1.53 last year. That puts the Class III price average at around $16, versus the 2018 average of $14.61, he said.

The butter market is in balance right now, according to Dryer, but “could head sharply higher any minute.” He sees potential for “some major strength” in butter as the supply draws lower, but he is not so confident on NDM. He sees it languishing for the rest of the year.

When asked about the whey market being heavily influenced by the health issue in China’s hog industry, he agreed and said he’s not very optimistic on the whey market and whey prices this year but "cheese will drive that Class III price for us.”

Grade A nonfat dry milk held all week at 98 3/4-cents per pound, unchanged on the week but 25 1/2-cents above a year ago, with 11 sales reported on the week.

Dry whey was up 1 1/4-cents on the week, closing Friday at 35 3/4-cents per pound, 5 1/4-cents above a year ago, with 20 cars sold on the week at the CME.

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.