June trade data is indicative of China’s continuing increase of dairy imports; unfortunately it is of small benefit to U.S. dairy farmers, according to Lucas Fuess, director of dairy market intelligence with HighGround Dairy in Chicago.

Speaking on the August 5 Dairy Radio Now broadcast, Fuess reported that whole milk and skim milk powder imports were strong. Fat imports, including anhydrous milkfat and butter, were down from a year ago, but last year was a strong year, he said. The only area of “no hope in sight for recovery” is whey and lactose, due to the African swine fever outbreak.

China also continues to diversify what countries it purchases dairy products from, according to Fuess. He cited skim milk powder as an example. June imports were up 27 percent from a year ago, but the U.S. market share fell from 18 to just 2 percent. U.S. sales were down 88 percent from a year ago.

There will be a protein deficit in China, due to the slaughter of the pig herd there, and some of that will be made up by dairy protein. Fuess said, “That is the ray of hope we continue to look out for … Chinese consumers are shifting away from pork, which is becoming expensive, and hopefully moving to dairy products.”

China is also culling some of its dairy herd to get that protein, so that will increase imports, as it cannot produce the product domestically. The best end is that the U.S. and China resolve their trade differences so the U.S. can export more of its dairy products to China, he concluded. The latest tariff threat surely puts that hope on hold.

In further politics, the Senate Finance Committee convened a hearing July 30 on the U.S.-Mexico-Canada Agreement (USMCA). National Milk Producers Federation President and CEO Jim Mulhern praised testimony given by Tom Vilsack, president and CEO of the U.S. Dairy Export Council (USDEC).

Vilsack said, “The USMCA delivers key wins for America’s dairy farmers and the exports that drive stronger sales. With USMCA, dairy farmers will see more export opportunities and greater trade certainty. Without USMCA, we lose out on $314 million in additional dairy exports.

“We also lose the benefit of the new rules this deal puts in place, such as key reforms to Canada’s dairy system and stronger safeguards for our cheese exports to Mexico.”

Mulhern commend the Senate for spotlighting USMCA’s importance and strongly supported the testimony offered by USDEC on how the agreement benefits dairy.

Price updates

The Agriculture Department announced the July benchmark Class III milk price at $17.55 per cwt., up $1.28 from June, $3.45 above July 2018, and the highest Class III price since December 2014. It equates to $1.51 per gallon, up from $1.40 in June and $1.21 a year ago. California’s July 4b cheese milk price a year ago was $14.09, $3.46 below this year’s FO Class III price,

Late Friday morning Class III futures portended an August price at $17.29, September $17.77, October $17.78, November $17.57, and December at $17.12. Looking ahead, the bottom for 2020 was $16.59 in March. The seven-month Class III average stands at $15.58, up from $14.37 at this time a year ago and $16.02 in 2017.

The July Class IV price is $16.90, up 7 cents from June, $2.76 over a year ago, and the highest Class IV since November 2014. Its seven-month average is $16.11, up from $13.73 a year ago and $15.30 in 2017.

The August 1 Dairy Products report shows June total cheese output slipped to 1.07 billion pounds, down 3.3 percent from May but 0.6 percent above June 2018. Year-to-date output was at 6.48 billion pounds, up 0.8 percent from a year ago.

Wisconsin produced 279.1 million pounds of that total, down 2.2 percent percent from May and 0.7 percent below a year ago. California produced 206.6 million pounds, down 5.2 percent from May but 0.8 percent above a year ago. Idaho contributed 85.8 million pounds, up 9.6 percent from May and 2.8 percent above a year ago.

Minnesota output totaled 61 million pounds, down 5.1 percent from May and 1.1 percent below a year ago. New Mexico produced 76.9 million, down 6 percent from May but 3.6 percent above a year ago.

Italian cheese totaled 468.95 million pounds, down 1.3 percent from May but 4 percent above a year ago. Year-to-date (YTD) Italian stands at 2.8 billion pounds, up 2.9 percent. Mozzarella output also jumped, hitting 375.8 million pounds, up 5.8 percent from a year ago, with YTD at 2.2 billion pounds, up 4.9 percent.

American type cheese totaled 426.5 million pounds, down 3.9 percent from May and 0.6 percent below a year ago, with YTD at 2.6 billion pounds, down 1.6 percent.

Cheddar output, the cheese traded at the CME, fell to just under 307 million pounds, down 14.7 million pounds or 4.6 percent from May and 5.9 million pounds or 1.9 percent below a year ago. YTD Cheddar is at 1.85 billion pounds, down 2.7 percent.

Revisions added 2.3 million pounds to the May total, now put at 321.7 million, up 0.9 percent from a year ago, compared to the originally reported 0.2 percent increase.

Dairy Market News said most Midwest cheese makers report demand is meeting expectations, but some say the early summer upticks have steadied somewhat. Curd and process cheese makers continue to report positive sales numbers.

Cheese production has slowed, as spot milk availability is dwindling. Those looking for spot milk are finding discounts harder to find. Prices ranged from $1 under to $2 over Class. Cheese stocks are balanced regionally.

Western cheese production remains active, with plenty of milk on hand and plants running near to full capacity. Some parts of the region saw a few milk loads at $4-$5 under Class. Cheese inventories are generally comfortable as steady end user and consumer demand has been able to offset production.

Butter output fell to 146.5 million pounds, down 14.4 million pounds or 8.9 percent from May but 4.4 million pounds or 3.1 percent above a year ago, ending four consecutive months that output was below a year ago. YTD butter is at 999.8 million pounds, down 1.9 percent from 2018.

Revisions reduced last month’s butter total by 2.1 million pounds, to 160.9 million, 5.4 percent below a year ago.

Animal updates

FCStone stated in its July 29 Early Morning Update that “dairy product demand seems to have slumped somewhat this month, but that doesn’t eliminate issues with milk production or cow culling on U.S. dairy farms.”

It added that U.S. milk production was flat versus last year through June, but “dairy producers have done a great job of increasing component production, particularly fat, for several years now. Component production bumps U.S. milk production to 0.8 percent growth for the first six months of this year. Still, that’s down from last year.”

Higher feed prices and just a small gain in the All Milk Price resulted in another slip in the June milk feed price ratio. The USDA’s latest ag prices report puts it at 2.08, down from 2.10 in May but it is up from 1.98 in June 2018.

The index is based on the current milk price in relationship to feed prices for a dairy ration consisting of 51 percent corn, 8 percent soybeans, and 41 percent alfalfa hay. One pound of milk today purchases 2.08 pounds of that ration.

The U.S. All-Milk price averaged $18.10 per cwt., up a dime from May and $1.80 above June 2018. California’s All Milk price was 20 cents higher than Wisconsin’s.

Looking at the cow side of the ledger; the June cull price for beef and dairy combined averaged $65.90 per cwt., up 30 cents from May, 40 cents below June 2018, and $5.70 below the 2011 base average of $71.60 per cwt.

Milk cow replacements averaged $1,240 per head for the quarter in July, up $100 per head from April but $80 below July 2018. Prices averaged $1,300 per head in California, up $200 from April and unchanged from a year ago. Wisconsin averaged $1,210 per head, up $80 from April but $40 below July 2018.

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.