Trade remains a volatile issue with the seemingly never ending dispute with China. President Trump meets with President Xi Jinping in Chile next month but there appears to be an agreement on Phase 1 which has halted additional tariffs.

 FC Stone dairy broker Dave Kurzawski reported in the Oct. 21 “Dairy Radio Now” broadcast that there is talk of a purchase by China of $40-50 billion worth of US agricultural products and, to put that in perspective, he said that China’s 2017 purchases, before the trade dispute began, totaled about $17.7 billion. Last year they were just $7.7 billion, “so this is a sizable increase, however we do not know yet if the $40-$50 billion is spread over three or four years.”

 Potentially it’s a really good deal for US agriculture, Kurzawski said, though the US does not export a large amount of dairy products to China. That of course could increase and currently China has removed its tariffs on US imports of dry whey which are needed to rebuild their hog population. Kurzawski says that while we currently have 30 cent dry whey at the CME, he believes we will see increased demand in 2020 “in spurts,” and with that, better prices.

The trade agreement with Japan also holds hope for the US dairy industry as does the US-Mexico-Canada trade agreement, which would replace the NAFTA.

 Unfortunately, the agreement has hit a snag in the House. The United Auto Workers Union has voiced concern over the number of automotive related jobs it would create in the US, according to the Northeast Dairy Farmers Cooperatives newsletter.

The National Milk Producers Federation praised the Trump Administration for including a number of European dairy products, particularly cheeses from major EU exporters such as Italy, on a list of WTO-authorized retaliatory tariffs related to the successful U.S. case against European Airbus subsidies.

While Italy’s President Sergio Mattarella lobbied Trump this week not to impose the tariffs, NMPF declared; “We must reject European efforts to deceive the US about the reality of Trans-Atlantic dairy trade. To that end, we asked the President to put the needs of US dairy farmers above those of Italian and European farmers by maintaining the retaliatory tariff list against Europe.”

“The US is running a $1.5 billion dairy trade deficit with Europe because of unfair EU trade practices that largely block our access to their market while they enjoy broad access to ours. EU policies such as Italian-initiated bans on American-made parmesan, asiago and gorgonzola mean that they can ship us $1 billion in cheese each year while US cheese exports to the EU clock in at $6 million.”

“In light of this disparity and the EU’s refusal to meet its WTO commitments regarding illegal Airbus subsidies, American dairy farmers saw the proposed retaliatory tariff list’s strong focus on EU dairy and cheeses as at least temporarily creating a slightly more level playing field for ‘Made in America’ products that face even higher barriers to entry in the EU market.”

Checking dairy’s bottom line, “Class III milk futures have climbed mostly higher since the beginning of the month and attractive margins remain in play as feed costs have held relatively steady,” according to the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC.

The MW stated; “Margins in the fourth quarter are approaching the 95th percentile of historical profitability within the last decade, driven largely by high Class III futures. Margins in the first and second quarter of 2020 are above the 85th percentiles, providing opportunities to protect potentially attractive pricing.”

Lastly, the National Milk Producers Federation has joined calls for the Environmental Protection Agency to “finish the required scientific review of an influential groundwater study in Washington State.”

NMPF called on EPA Administrator Andrew Wheeler to have the EPA conduct a full review of what they’re calling a ‘flawed’ study and joined several other groups seeking EPA action on the Yakima nitrate study, including the American Dairy Coalition, Congressman Dan Newhouse, the Washington State Dairy Federation, Save Family Farming, and others.

“Aside from the apparent flaws in the study, perhaps the most startling issue is the fact that this study has influenced decisions made by EPA without the required full review,” wrote Clay Detlefsen, NMPF’s Senior Vice President and Staff Counsel, in the letter to Administrator Wheeler.

 “While cursory reviews were conducted, whole sections were left out,” he said, and Detlefsen listed four key areas where the study was flawed and based on errors and inadequate data. His letter says the study “appears to unfairly accuse the Washington State dairy farmers for contributing the majority of high nitrate levels in lower Yakima valley groundwater” At least 15 top scientists have rejected the study, saying the data that was gathered doesn’t support its conclusions.

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