The National Milk Producers Federation marked the one-year anniversary this week of then-FDA Commissioner Scott Gottlieb’s famous observation that ‘almonds don’t lactate’ by reminding the agency “it still has not resolved the issue and that citizens who heeded its call for comments with thoughtful responses deserve answers.”

“An almond doesn’t lactate, I must confess,” Gottlieb said last July 17, admitting that FDA has been lax in enforcing its own rules on the use of dairy terms on products containing no dairy ingredients. “Have we been enforcing our standard of identity? The answer is, probably not,” he said, while pledging agency action in “something close to a year.”

“FDA’s longstanding inaction on enforcing its own standards of identity is perpetuating the marketing of products using milk and dairy terms when those products don’t match the nutritional content of the dairy products they are imitating,” said Jim Mulhern, NMPF president and CEO.

“Dairy farmers have never called for bans on fake-food competitors, nor have they called for market censorship. They do want the FDA to enforce its own rules defining what a product is and what it isn’t, in keeping with similar standards enforced in other countries around the globe. The clock is still ticking. We are not going away,” Mulhern concluded.

Powder and cheese lifted the July 16 Global Dairy Trade auction (GDT), ending four consecutive declines. The weighted average of products offered jumped 2.7 percent, following a 0.4 percent loss on July 2, 3.8 percent on June 18, 3.4 percent on June 4, and 1.2 percent on May 21. Sellers brought 55.1 million pounds of product to the market, up from 54.5 million in the last event and the highest since Feb. 19.

All products traded were in the black, led by skim milk powder, up 3.8 percent. This was the first positive move in eight auctions. GDT Cheddar was up 3.3 percent, following three consecutive events of loss. Butter and anhydrous milkfat were both up 1.7.

FC Stone said, “While mounting concerns over fresh milk supply could be a factor, today it seems more of a U.S. issue. We can mount questions around supply of milk in Europe this summer or New Zealand this fall, but that doesn’t seem to be a driving factor at the moment. Instead, we surmise that the demand side of the equation, perhaps stemming from Asian protein replacement demand as continued Swine Flu issues mount, is a larger issue today.”

“Fortunately, the U.S. and Mexico have lifted their retaliatory tariffs, paving the way for Congress to ratify the U.S.-Mexico-Canada Agreement (USMCA), a high priority for the U.S. dairy industry and all of U.S. agriculture,” says USDEC. “While talks between China and the United States are continuing, we are less than optimistic that we will see Chinese tariffs lift soon. Tariffs as high as 45 percent on U.S. dairy products and ingredients are having a negative effect.”

“Since the tariffs were enacted last July, the volume of combined U.S. dairy exports to China has dropped 43 percent compared to the same period of time before tariffs went into effect,” according to the USDEC.

The U.S. market however is chugging along irrespective of the tariffs and FC Stone’s Dave Kurzawski said in the July 22 Dairy Radio Now broadcast that “The bigger story is the domestic bull market that is emerging for all dairy products.” He adds that “the roots are in languishing U.S. milk production,” which he blamed on the previous years of poor dairy prices and farms exiting the business.

“The U.S. market is trading on its own accord,” Kurzawski explained, and while he admits we want to look at exports and we know exports are important to the U.S. dairy industry long term, “the short term scenario is, it doesn’t matter what the butterfat price in Europe is doing, the U.S. butterfat price is going to do its own thing, as will U.S. cheese. The U.S, market is focused on the other 85 percent of the business, the domestic market.”

He admits some regions of the country are doing fine in milk output but rising temperatures could change that, plus “there’s lots of buyers for milk in the Midwest, they’re competing for that milk, and that’s going to continue for the next at least six months,” he concluded.

CME traders were anticipating Friday afternoon’s Cattle Report plus Monday’s June Milk Production and Cold Storage reports. Dairy Market News reported that a growing number of Midwest cheese producers are concerned about farm milk availability.

 Offers are down due to the heat as farmers report in some cases, dramatic milk-per-cow output declines however some cheesemakers are still finding discounted spot milk. Prices ranged from $1.25 under to 75 cents over Class. Cheesemakers are concerned about more 90 plus degree temperatures in the upper Midwest. Cheese sales reports have been mostly positive. Specialty cheesemakers continue to prepare for fall demand increases, while pizza cheese and curd producers suggest retail/food service demand remains healthy. Cheese production has slipped overall, but remains mostly steady.

Some Midwestern butter plants scheduled downtime for maintenance this week. This is timely, says DMN, “as cream multiples on the spot market have become fiscally beyond their reach. Ice cream production increases have naturally merged with the increasing temperatures, which have begun to noticeably affect farm milk output. These two factors are undoubtedly prompting butter makers to relay a tightness on cream markets, and they expect it to remain so.”

The Agriculture Department’s monthly Livestock, Dairy, and Poultry Outlook, issued July 17, mirrored milk price and production projections in the July 11 World Agricultural Supply and Demand Estimates report.

The Outlook also stated “Based on May data, the forecast for the size of the milking herd for 2019 has been raised 5,000 head to 9.34 million. Based on recent milk yields, higher expected milk cow numbers, and higher feed price forecasts, the milk per cow forecast for the year has been lowered 10 pounds to 23,365. The overall milk production forecast for 2019 is 218.2 billion pounds, unchanged from last month’s forecast.”

“Concern is growing that high prices may begin to discourage dairy product demand at the same time producers are incentivized to increase milk production. The forward curve would appear to reflect this thinking as Class III prices in early 2020 are trading at more than a dollar discount to fall values. USDA released the July WASDE report which updated estimates for milk production as well as dairy product imports and exports,” much of which I reported here last week.

The MW added that “Lower feed demand from China due to the African Swine Fever outbreak has been a major drag on whey exports this year, and that trend is expected to continue into 2020.”

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.