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The Agriculture Department left its 2018 milk production forecast in the latest World Agricultural Supply and Demand Estimates report (WASDE), unchanged.
2018 production and marketings remain at 219.0 and 218.0 billion pounds respectively. If realized, 2018 production would be up 3.5 billion pounds or 1.6 percent from 2017.
The 2018 import forecast was reduced slightly on a fat basis, but unchanged on a skim-solids basis. Exports on a fat basis were also unchanged, but skim-solids-basis exports were raised on stronger sales of nonfat dry milk and skim milk powder, and lactose. 
The annual product price forecast for cheese was unchanged at the midpoint although the range was narrowed. Butter prices are expected to increase more slowly in the second half of the year and the price forecast was reduced. The nonfat dry milk (NDM) price was reduced slightly on current prices. The annual whey price forecast was lowered on larger supplies and weaker demand. 
The expected Class III milk price average was lowered, based on the lower whey price forecast. Look for a 2018 average of around $14.45 per hundredweight (cwt.), down 15 cents from last month’s projection, and compares to the 2017 average of $16.17 and $14.87 in 2016.
The Class IV price estimate was lowered, based on the lower NDM and butter price forecasts. It is estimated to average around $13.55, down a nickel from last month’s estimate, and compares to $15.16 in 2017 and $13.77 in 2016. 
This month’s 2017/18 U.S. corn outlook is for reduced feed and residual use, slightly lower food, seed, and industrial use, and increased ending stocks, according to the WASDE. The report showed U.S. corn carryout at 2.182 billion bushels, up 55 million from the March report. 
The projected range for the season-average corn price received by producers was unchanged at the midpoint with the range narrowed to $3.20 to $3.50 per bushel. Global coarse grain production for 2017/18 is forecast 7.0 million tons lower than last month to 1.3 million. World corn carryout, at 197.8 million tons, was down from 199.17 million tons in March. 
The U.S. soybean carryout was 550 million bushels, down 5 million from the March report due to better exports and better domestic crush. World soybean carryout was 90.8 million tons, down from 94.90 million tons in March. 
The season-average soybean price was forecast at $9.10 to $9.50, unchanged at the midpoint. Soybean meal prices were projected at $340 to $360 per short ton, up $10.00 at the midpoint. 
World corn carryout was reduced on lower Argentine production due to dry conditions and a smaller Brazilian second corn crop. World soybean carryout was reduced on sharply lower Argentine production which partially offset huge Brazilian soybean production.
Dairy prices saw more ups and downs the second week of April. The Cheddar blocks finished Friday the 13th at $1.6050 per pound, up a quarter-cent on the week and 13 cents above a year ago. The barrels closed at $1.46, up a penny, 3 1/4-cents above a year ago, but still a higher than normal 14 1/2-cents below the blocks. Two cars of block were traded at the CME this week and 29 of barrel.
Cheese demand reports are generally positive from Midwestern producers, according to Dairy Market News. “There are some warm spots on the weather forecast ahead of grilling season, although parts of the upper Midwest were expecting heavy snow over the weekend and into the following week.”
Spot milk remains discounted, $2 to $3.50 under Class. Some cheesemakers have turned up production the past few weeks and are fortifying with nonfat dry milk (NDM) in order to alleviate fairly heavy NDM stocks. Some questions arise with contacts regarding the relatively sizeable CME block to barrel price gap, but generally Central contacts view the markets with a bullish eye, says DMN.
“Western cheese output is increasing along the same trajectory as milk output,” says DMN. Contacts say the spring flush has commenced within areas of the Western region and cheesemakers have plenty of milk. Contacts report that demand has been strong for both blocks and barrels, but has recently subsided somewhat for barrel cheese, as suggested by the widening gap between CME prices. Inventories are heavy, but not necessarily burdensome at this point, “However,” warned DMN, “If U.S. and European cheese prices converge, manufacturers worry they may face the ineluctable realization that competition for export sales may become more fierce.”
Spot butter climbed to $2.32 per pound on Monday but slipped 2 cents Thursday and closed Friday at $2.2875, unchanged on the week but 20 cents above a year ago. Forty six cars were sold on the week, with 23 on Tuesday alone.
Central butter plant managers are receiving more cream offers and butter sales are taking off, both on and off of the CME marketplace. 
Some producers suggest there is strong interest from export purchasers in multiple global localities, as butter prices domestically are competitive. Adding to demand news, domestic interest is also adequate, according to the USDA.
Western butter output is strong. Many states are in the spring flush so abundant milk loads are clearing through Class IV utilization. Butter sales were steady compared to the previous week and spot demand seems to be strong.
Cash Grade A nonfat dry milk closed Friday at 73 1/4-cents per pound, up a half-cent on the week but 11 1/4-cents below a year ago, with six sales on the week.
The spot dry whey closed Friday at 30 1/2-cents per pound, down 1 1/2-cents.
On a brighter note, the U.S. Dairy Export Council (USDEC) reports that U.S. dairy export volume reached an all-time high in February (on a daily-average basis), led by strengthening ingredient sales to Southeast Asia, record lactose exports to China and broad-based increases in overseas sales of cheese. Suppliers shipped 181,797 tons of milk powder, cheese, butterfat, whey and lactose during the month, up 19 percent from last February. U.S. exports were valued at $454 million, up 4 percent.
“Sales to Southeast Asia have been robust in early 2018. Shipments of nonfat dry milk/skim milk powder (NDM/SMP) and dry whey to the region were up 71 percent versus a year earlier. Indonesia and Vietnam bought more NDM/SMP; the Philippines, Malaysia and Vietnam bought more dry whey. On a value basis, total dairy exports to Southeast Asia were $64 million, up 13 percent from 2017. Overall NDM/SMP exports were 66,750 tons, up 28 percent from last year, and the second-most ever,” according to the USDEC.
“Cheese exports totaled 28,150 tons in February, the most in eight months (daily average), and up 7 percent from a year earlier. U.S. suppliers increased sales to China (up 100 percent), Japan (up 21 percent), Central America (up 32 percent).”
U.S. exports, on a total milk solids basis, were equivalent to 17.2 percent of U.S. milk production in February, the highest since October 2016, says the USDEC, and imports were equivalent to just 3.1 percent.
So why are U.S. milk prices where they are? HighGround Dairy’s director of dairy market intelligence, Lucas Fuess, in the April 16 Dairy radio Now broadcast, blamed supply, stating; “The U.S. continues to produce a lot of milk, especially as you look to the Western states.” He reminded us that U.S. output was up 1.8 percent in January and February and says we’re close to a multi-year high on cow numbers so “as long as the milk continues coming, prices continue to be distressed.”
Fuess also warned of the consequences of losing those global markets, echoing comments made in the previous week’s broadcast by Jerry Dryer, analyst and editor of the Dairy and Food Market Analyst newsletter. Dryer stated that U.S. dairy prices will take a “significant hit” if global export markets disappear or are abandoned due to trade disputes. 
Dryer also discussed some of his long range forecasts and stated; “On the supply side of the equation, everything looks like it’s going to stay the same. There’s plenty of milk everywhere in the world, and I don’t see milk producers in the U.S.A. letting up on the throttle for at least another four to six months. On the demand side, everything is kinda staying the same. It’s good, it’s not exceptional, but it’s fairly steady, here and around the world. We’re moving product overseas and we’re moving product domestically so that means prices are going to stay, pretty much range bound where they have been.”
He warned that there may be a few days or weeks where prices are significantly lower “simply because inventory has totally overwhelmed the market during the spring flush, but it’s pretty much a steady as she goes climate until we either get rid of some of this milk supply or figure out a new way to create demand.”
Global demand is OK but nothing to write home about. China’s imports are not setting the world on fire and the uncertainty over NAFTA and talk of trade wars has unsettled the market. Dryer said the risk in his forecast is “all downside.”
“If we lose some of these export opportunities or just kiss them goodbye, product going to Mexico, China, or the Middle East;” he warned, “Then I don’t know where the bottom is. Prices will take a significant hit. They have no choice. We export 15 percent of what we produce. One day a week goes overseas, the domestic market is not going to soak that up near term,” he concluded.
Fuess also stated that “The dairy industry is not opposed to renegotiation or looking at how pieces of NAFTA can be improved,” but he underscored “The access to Mexico is really critical.”
Cooperatives Working Together (CWT) accepted 10 requests for export assistance on the week from members to sell 1.25 million pounds of cheese and 842,166 pounds of butter to customers in Asia, Central America, the Middle East, and North Africa. 
One final export note; The April 11 Daily Dairy Report says “Dairy is a rapidly growing market in Egypt. Five of the top-10 food growth products in Egypt are dairy, condensed and/or sweetened milk and cream, butter, cheese, infant food, and food preparations, which often include dry milk-based ingredients, according to a recent report by USDA’s Foreign Agricultural Service (FAS).” 
“In 2017, Egypt imported $4 billion (U.S.) worth of food ingredients for its domestic food processing industry. The United States claimed a 3.5 percent share, or $138 million, making the United States the eighth largest source for Egyptian food ingredient imports,” according to the DDR.
Back home; California’s May Class I milk price was at $16.09 per hundredweight for the north and $16.36 for the south. Both are up 12 cents from April but 56 cents below May 2017. It is the highest Class I since December 2017 and puts the five month average at $15.76 for the north, down from $17.79 at this time a year ago and compares to $15.67 in 2016. The southern average stands at $16.03, down from $18.06 a year ago and $15.94 in 2016.
In politics, the House Agriculture Committee introduced its 2018 Farm Bill Thursday, which drew praise from the National Milk Producers Federation. An NMPF press release stated; “The bill introduced includes several changes we have advocated for, particularly in improving coverage levels and providing greater coverage flexibility for dairy producers. It also includes important language on price risk management, which NMPF has worked on closely alongside the International Dairy Foods Association (IDFA).” 
The IDFA said “We’re hopeful that our collaborative efforts will help to smooth the passage of a farm bill that includes provisions designed to enhance risk management options for dairy processors and producers and establish a retailer incentive program in the Supplemental Nutrition Assistance Program, or SNAP, that includes fluid milk.”
Those SNAP provisions remain a source of contention, according to Bob Gray’s April 13 Northeast Dairy Farmers Cooperative’s newsletter, and are “a major sticking point in getting a Farm Bill done in 2018.”
Highlights of the bill, according to Gray, include the fact that dairy producers can enroll between zero and 90 per cent of their annual production as opposed to the current 25 to 90 percent requirements. MPP payments will be calculated on a monthly basis as opposed to a bi-monthly basis, and it allows producers to use both the MPP and the Livestock Gross Margin Dairy Insurance Programs at the same time as long as it does not cover the same milk. The Dairy Title changes the calculation for determining the Class I skim milk price by removing the “higher of” provision in setting the Class III and Class IV price under the Federal Milk Marketing Orders. It adds an average of the advanced pricing factors plus 74 cents, it extends the Dairy Forward Pricing Program, extends the Dairy Indemnity Program, and extends the Dairy Promotion and Research Program.
Lastly, the Office of the U.S. Trade Representative has accepted a petition from NMPF and USDEC to examine India’s failure to follow through on its obligations to provide “equitable and reasonable access to its market” for dairy products. Indonesia will also be included in the review, according to NMPF. 
Lee Mielke is a graduate of Brown Institute in Minneapolis, MN. He’s formerly the voice of the radio show “DairyLine,” and his column appears in agricultural papers across the U.S. Contact him at lkmielke@juno.com.​

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