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Lackluster exports and heavy stocks pressure cheese market

Dec. 7, 2018

By Alyssa Mitchell

MADISON, Wis. — Analysts see little upside potential for spot cheese at the Chicago Mercantile Exchange (CME) as the end of the year approaches.

Heavy cheese stocks and a slowdown in exports are keeping a lid on upward price movement at the CME. Analysts note in a rare event for this time of year, cheese stocks increased from August to October.

According to a research report released this week by Blimling and Associates, Madison, Wisconsin, cheese stocks increased by 14 million pounds from August to October, the first gain since 1983 and the largest going back to 1943.

“That never happens,” says Eric Meyer, president of HighGround Dairy, Chicago. “We’re making a ton of cheese in this country — the stocks levels are unprecedented. At the same time, exports are pretty poor and domestic demand hasn’t been great.”

USDA’s Dairy Market News says cheese contacts suggest regional cheese volumes are plentiful on the whole.

“They say some buyers are holding off, awaiting the potentiality of further market bears. That said, demand reports are mixed from producer to producer. Some relay average, or just below average, sales for this time of the year, while others suggest orders are fairly robust and last-minute holiday orders are keeping production active,” Dairy Market News says.

CME Cheddar barrels settled at $1.3150 Nov. 30 but this week have dropped 9.25 cents to settle at $1.2225 per pound today. Blocks remain comfortable in the mid-$1.30 range, settling at $1.3500 per pound to end this week.

While CME futures show cheese in the high-$1.30s to mid-$1.40s in the coming months, Meyer says it is not uncommon to see the forward curve on futures carry a steep premium in a bear market. He adds that the historic block/barrel price spread seen this fall also is significant.

Sara Dorland, managing partner with Ceres Dairy Risk Management LLC, Seattle, agrees, noting that with the wide spread, one that has averaged more than 10 cents this year, it would take remarkably high blocks to offset lower barrel prices or both blocks and barrels rising into the mid $1.40s and $1.30s, respectively, to match the projected futures price point.

“Given higher rates of production and tariffs that do not appear to be lifting, that could be challenging,” she says.

Dorland is referring to ongoing retaliatory tariffs on U.S. cheese from Mexico in response to steel and aluminum tariffs levied by the Trump administration. She says the lifting of those tariffs would be the fastest way to buoy lackluster spot cheese prices.

While leaders from the United States, Mexico and Canada last week signed a new trade agreement, details on ending the tariffs have not yet been released. (See article in this issue.)

Andrew Faulman, floor manager at Rice Dairy LLC, Chicago, agrees that removing the tariffs from Mexico also could make U.S. cheese more competitive in the export market at today’s price levels.

He says another possibility is cheese prices lowering to a point where promotional activity picks up enough to get higher volumes of product to move off the shelves.

Blimling says that while it’s possible that low prices spur additional promotion, open up export avenues and tamp down production, “we don’t see those forces unfolding quickly or convincingly anytime soon.”

The nonfat dry milk (NDM) spot market is a different story. Blimling says U.S. manufacturer inventories are down to the lowest levels since March 2017, falling to 253 million pounds by Oct. 31, a 20-percent year-over-year decline. Global demand for NDM is good, Blimling adds.

NDM at the CME remained above $0.90 per pound from Nov. 26-Dec. 5, before declining in the latter half of the week to settle at $0.8850 today.

Meyer says he’s uncertain about the upside potential of the NDM market.

“I’m not sure we’re going to break $1.05, but we do feel the fundamentals are starting to shift, which indicates there is more upside rather than downside potential in the coming months,” he says.

Dairy Market News says trading activity was steady to busier on the NDM spot market this week, with Mexican buyers showing increased interest.

“Some traders suggest Q1 2019 contracts are in the works and/or wrapping up at $0.90-plus,” Dairy Market News says. “The current NDM market tone is firm.”

Faulman says the lack of significant volatility in price around current levels seems to be encouraging more hand to mouth-type buying.

“Assuming this hand to mouth buying continues amidst a futures market that has a carry structure in it, I would look for continued support in the spot market,” he says.

However, Dorland notes with extra powder coming from Canada, the European Union intervention program and possibly India, there is more than enough powder to satisfy current demand globally.

“That could make higher NDM prices more difficult especially given the current U.S. premium to European milk powders at present,” she says.

Meanwhile, the U.S. butter market remains steady in the $2.20-$2.30 range at spot, settling at $2.2075 per pound today.
With the end of the holiday season fast approaching and world prices at or below $2 per pound, it seems reasonable to expect CME butter prices to ease from their current levels, Dorland says.

“That said, cream demand remains strong, and that is keeping year-end churning in check,” she says. “That demand will subside in the next few weeks, so it seems reasonable to expect U.S. prices to slide but remain higher than world prices, at least through the end of this year.”

Blimling agrees heavy supply coming out of the holiday season will weigh on butter prices to start the new year, but sustained strong demand for deferred coverage will limit downside potential.

Analysts say trade deals are an unknown that could impact markets moving forward.

“Trade is an obvious wildcard going forward,” Blimling says. “Last weekend’s news about a truce with China obviously deserves attention. For now, count us as skeptical until more details and actual orders for goods emerge. And, Mexico is going to be a problem until the administration deals with steel and aluminum.”

Faulman says with continued talks of progress toward resolution of trade issues with China, Mexico and Canada, he is looking for spot markets to at the very least remain stagnant around current levels with potential for upside.

“Assuming we see no progress or a regression on these trade deals, then spot markets feel like they can rotate back down to the lows we’ve seen in 2018,” he adds.

“Our markets will act very fickle until something real and concrete shows that the tariffs are ending or new policy is being enacted,” Meyer adds.


Tariffs continue despite signing of USMCA, news of China truce

Dec. 7, 2018

WASHINGTON — Despite the signing last week of the new U.S.-Mexico-Canada trade agreement (USMCA), tariffs from Mexico on U.S. dairy products remain in place as a retaliatory measure in response to U.S. tariffs on steel and aluminum.

News reports say U.S. Trade Representative Robert Lighthizer has confirmed that talks with Mexico and Canada about the tariffs would continue this week in an effort to “come to a conclusion before long.”

At the same time, President Donald Trump has indicated he plans to notify Canada and Mexico that the United States will exit the North American Free Trade Agreement (NAFTA) in six months; stakeholders say that would leave Congress with the choice to approve USMCA by that time or allow things to revert to the pre-NAFTA trade landscape.

Meanwhile, during last week’s G20 summit in Buenos Aires, Argentina, President Trump and Chinese President Xi Jinping agreed to freeze tariffs at current levels temporarily without additional escalation for 90 days, beginning Dec. 1. President Trump agreed to pause U.S. plans to escalate tariffs on Jan. 1 and to allow a 90-day period for negotiations on an array of outstanding issues related to Chinese technology transfer policies and intellectual property protections, non-tariff barriers, World Trade Organization reform, artificial intelligence and other issues.

China’s Ministry of Commerce on its website confirmed that the meeting between Trump and Jinping was “very successful” and that in 90 days, “economic and trade teams of both sides will actively push forward the consultation following clear schedule and roadmap.”

The statement also said China will start implementing the specific aspects of the newly-reached consensus “as soon as possible” but did provide further details.

The White House this week said China also agreed to begin purchasing U.S. agricultural products immediately. So far, the Chinese government has not specified the amount or type of agricultural products, but the International Dairy Foods Association says it believes they most likely will be U.S. soybeans.

Larry Kudlow, White House national economic council director, participated in the meeting and said that he expects China to drop its retaliatory tariffs on U.S. agricultural products, IDFA says, noting, however, that the organization does not expect that dairy companies will see any near-term relief on the retaliatory tariffs on U.S. dairy exports to China.

Due to China’s intellectual property policies and practices, the United States earlier this year imposed tariffs on billions of dollars’ worth of Chinese goods. China retaliated against these U.S. tariffs with duties on dairy products.

As of September, China has placed tariffs on essentially all U.S. dairy products. From July to September 2018, U.S. whey exports declined 36 percent year-over-year and U.S. cheese exports have declined 51 percent year-over year, IDFA notes.

“We are monitoring this situation very closely and we will continue to advocate that China lift its tariffs on U.S. dairy products as soon as possible,” says Beth Hughes, IDFA senior director of international affairs.

If the two sides cannot reach an agreement over the next three months, the Office of the U.S. Trade Representative would then proceed with previous plans to increase tariffs from 10 to 25 percent on $200 billion worth of Chinese imports.


U.S. cheese production climbs 3 percent from October 2017

Dec. 7, 2018

WASHINGTON — Total U.S. cheese production, excluding cottage cheese, was 1.12 billion pounds in October, 3.0 percent above October 2017’s 1.09 billion pounds and 6.1 percent above September 2018’s 1.05 billion pounds, according to data released this week by USDA’s National Agricultural Statistics Service (NASS). (All figures are rounded. Please see CMN’s Dairy Production chart.)

When adjusted for the length of the months, total U.S. cheese production in October was 2.7 percent higher than September production on an average daily basis.

Italian-type cheese production totaled 470.6 million pounds, 3.5 percent above October 2017. Production of Mozzarella, the largest component of Italian-type production, totaled 369.6 million pounds, up 6.3 percent from a year earlier.

American-type cheese production totaled 433.5 million pounds, 0.7 percent above October 2017. Production of Cheddar, the largest component of American-type production, was 303.4 million pounds, down 1.5 percent from the previous year.

Wisconsin led the nation’s cheese production with 290.2 million pounds in October, 1.1 percent higher than its production a year earlier. California followed with 214.7 million pounds, up 1.2 percent from its production in October 2017.

U.S. butter production was 144.3 million pounds in October, 0.3 percent below October 2017’s 144.7 million pounds but 7.0 percent above September 2018’s 134.8 million pounds, according to NASS. When adjusted for the length of the months, October butter production was up 3.6 percent from September production on an average daily basis.

California led the nation’s butter production with 41.0 million pounds in October, down 6.4 percent from a year earlier.

U.S. production of nonfat dry milk (NDM) totaled 125.3 million pounds in October, down 13.6 percent from October 2017’s 145.0 million pounds but up 15.1 percent from the 108.8 million pounds produced in September 2018. When adjusted for the length of the months, NDM production in October was up 11.4 percent from the previous month on an average daily basis.


Award-winning Schuman Cheese aims to ‘push the boundaries of flavor'
Collaboration, expertise are keys to artisan line success

By Kate Sander

FAIRFIELD, N.J. — Schuman Cheese, a fourth-generation, family-owned business, continues to innovate and adapt to changing market needs.

The company started in 1946 as an importer of Italian cheese, expanded to different areas of the world like South America and Eastern Europe to use its expertise to make cheese abroad and, in more recent years, has invested heavily in the United States to produce specialty artisan cheese.

“As we map out our future, innovation is always at the front of our mind,” says Allison Schuman, a member of the Schuman family’s fourth generation and the company’s senior director of sales. “We pride ourselves on being nimble, and we continually challenge ourselves to be disruptive innovators for the cheese category.”

The shift to U.S. production occurred about 13 years ago, Schuman says, noting this was a pivotal point in company history.

“It has allowed us to keep tight control over the quality of what we produce, be near the production and use our creativity to innovate around cheesemaking,” she says, noting the company makes a wide variety of cheeses including Parmesan, Fontina, Blue and Alpine-style cheeses.

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Specialty cheese collections, gifts trend during holiday time

Nov. 23, 2018

By Trina La Susa

MADISON, Wis. — Cheesemakers and retailers are offering a myriad of new specialty cheeses and cheese gift collections during the 2018 holiday season.

A variety of specialty cheeses are gaining popularity this year, ranging from award-winning and imported cheeses to luxury and organic cheeses.

The weeks before Christmas show some of the strongest sales of the year for cheese, according to Dairy Farmers of Wisconsin. Their data from the 2017 holiday season indicate that natural cheese sales are 60 percent higher than average the week before Christmas, and 28 percent higher right before Thanksgiving.

“The holidays are prime time for cheese boards. Whether it’s providing an array of artisan cheeses or a beautiful board and knife set, cheese boards are a wonderful gift to share during the holidays,” says Molly Rippinger, associate brand manager, Sartori Cheese Co., Plymouth, Wisconsin.

The BellaVitano gift crate is one of the most popular gifts from Sartori Cheese during the holidays, says Rippinger. It features five 5.3-ounce wedges: Balsamic, Espresso, Black Pepper, Raspberry and Merlot BellaVitano. All five varieties are award-winning cheeses.

The George DeLallo Co., a national Italian foods brand, aims to make cheese gift giving and entertaining easier. The Italian food and entertaining experts at DeLallo hand select more than 50 food gifts to spread holiday cheer in its gourmet gift collections, from imported Italian specialty items to cured salami, olives and antipasti, spreads, dried fruit, nuts, charcuterie and of course — cheese.

“We know how hard it is to juggle holiday shopping along with all the other obligations of the season, especially when you’re looking for the perfect gift. That’s why we offer so many great gifts in a range of prices, something for everyone on your list,” says Giuliana Pozzuto, marketing director, DeLallo.

DeLallo offers customers the option to curate their own gifts with the Build Your Own option for creating a gift box personalized to fit any taste, palate or dietary restriction. The Ready-to-Serve Gourmet Gifts feature charcuterie and cheeses on a natural slate tray vacuum-sealed for freshness and ready to enjoy as soon as they arrive.

Rogue Creamery in Central Point, Oregon, says one of the most popular choices during the holidays is its “Cheese Party” gift box, which provides the recipient with everything needed to create their own cheese platter — from a specialized cheese knife to a cutting board shaped like the state of Oregon. Additionally, the company’s selection of organic cheeses are paired with Organic Potter’s Crackers and a 4-ounce jar of honey.

“We offer seven unique gift boxes that vary in price and contents, all for sale through our website. Our team works together to select which cheeses go in each box, determined by balancing factors such as product popularity, inventory, and the themes we’d like to highlight — for example, Recent Award Winners or Rogue Team Favorites,” says Marguerite Merritt, marketing manager, Rogue Creamery.

Merritt says that organic is a fast-growing segment of the dairy industry, and Rogue Creamery customers care about the company’s commitment to organic in its cheeses and other offerings. To meet this demand, Rogue Creamery prefers to include certified organic cheese accompaniments, such as organic crackers or jam in its holiday gift boxes when possible.

When it comes to buying cheese gifts, consumers tend to either buy curated collections to make gift giving easier or create a gift a la carte to suit a specific recipient’s tastes. Time for picking out gifts and familiarity with cheese can be two factors associated with cheese gifting, according to Mindi Sachs, public relations manager, Murray’s Cheese.

Murray’s Cheese in New York City says that consumers are looking to add indulgent cheese gifts to their holiday gatherings.
“Trends this year tend to lean into luxury items, including truffle everything. We have a Truffle Lover’s Collection that’s perfect to appease anyone’s truffle craving. Additionally, we sell a selection of truffle products including cheeses, oils and honey,” says Sachs.

Sachs says another big trend this year is edible centerpieces also known as Cheese Towers. These are towers entirely built of cheese wheels, and they serve a double purpose — a beautiful centerpiece for holiday decor but also a tasty starter for parties.

Dairy Farmers of Wisconsin’s data on retail cheese sales forecasts overall food gifting to grow 4.1 percent in 2018, reaching $19.8 billion in sales. Winter holidays also are expected to be the top food gifting occasions with 54 percent of those who buy food gifts throughout the year doing so at this time.


California dairy legacy built on value-added collaborations

Nov. 23, 2018

Editor’s note: As part of our series, “From Cow to Curd: A Look Across the Nation,” Cheese Market News takes a look at the cheese and dairy industry across the United States. Each month we examine a different state or region, looking at key facts and evaluating areas of growth, challenges and recent innovations. This month we are pleased to introduce our latest state — California.

By Rena Archwamety

MADISON, Wisconsin — The dairy industry in California dates back more than 200 years, when in 1769 Father Junipero Serra began to establish 21 missions along the state’s coastline. The California Milk Advisory Board (CMAB) says Serra introduced dairy cows and cheesemaking, as well as many varieties of fruits and vegetables, including grapes, laying the foundation for California’s agriculture industry.

The state’s cow population reached 100,000 by 1860 following California’s Gold Rush. CMAB also notes that Monterey Jack, developed from old mission recipes, was first marketed in California in 1882; Dry Jack was created in San Francisco in 1915; and California Teleme was developed by Greek immigrants in the 1920s.

Today California is the top milk-producing state in the nation, with 39.8 billion pounds produced by its 1.7 million cows in 2017, and it is No. 2 in cheese production at 2.5 billion pounds in 2017, according to USDA data.

• Adding value

Point Reyes Farmstead Cheese COO Lynn Giacomini Stray, whose family has been dairy farming in Marin County for three generations, says this area was the state’s milkshed before larger dairies started establishing themselves in the valley between Sacramento and Fresno.

“In the 1950s there were about 300 dairies in Marin County,” she says, noting that now the county is down to about 20 dairies. “There’s great soil and moderate temps year-round. It really is set up perfectly for dairy animals.”

The dairies farther south in the Central Valley, which average around 1,000 cows per dairy, today are the main source of fluid milk for California. Marin County meanwhile has become a hub for quality farmstead and artisan cheese products as the smaller dairies looked for ways to add value to their milk and remain economically viable.

“In the late 1990s when we saw conventional dairy prices remain stable but inputs had been increasing, the smaller-size dairies had to look at how to continue to dairy and be sustainable, and also pass along to the next generation,” Stray says.

Stray’s parents, Bob and Dean Giacomini, had been selling fluid milk for 40 years and wanted to bring their four daughters into the family business. They decided to start a cheese business on the farm as it passed on to the next generation.

Point Reyes Farmstead Cheese began making its raw milk Original Blue in 2000 and has since added Point Reyes Toma, Bay Blue and Gouda, all made from pasteurized milk. Stray and her three sisters purchased the business from their parents in 2010.

Dairy farmers in other parts of the state also have worked together to process and market value-added products, some on a very large scale.

In 1984, 12 central California dairy families, seeking to maximize the value of their Jersey cows’ high solids milk, created Hilmar Cheese Co. in Hilmar, California.

“They invested heavily in research, the latest technology and staff excellence,” says Denise Skidmore, director, education and public relations, Hilmar Cheese Co. Inc. “Committed to innovation and sustainability, Hilmar Cheese Co., and our division, Hilmar Ingredients, has grown to serve customers in more than 50 countries.”

Today about 200 dairy farm families directly supply milk to Hilmar Cheese Co.’s manufacturing sites in Hilmar and Turlock, California. The company also now has processing facilities in Texas. Hilmar converts this milk into a variety of cheeses, whey protein, lactose and milk powders.

Meanwhile, 43 percent of California’s milk is produced by the 400 dairy farm members of California Dairies Inc. (CDI), the nation’s second-largest dairy processing cooperative in the United States. Headquartered in Visalia, California, CDI was formed in 1999 after the merger of three of California’s major cooperatives: California Milk Producers, Danish Creamery and San Joaquin Valley Dairymen, all of which had roots dating back to the turn of the 20th century.

CDI manufactures fluid milk products, butter and milk powders. It manufactures 22 percent of the U.S. butter market share and 42 percent of the nation’s milk powder. CDI has sales of more than $4 billion across all 50 states and in more than 50 foreign countries. Its producers, who ship 17 billion pounds of milk annually, are located from San Diego County in the south to Sacramento County in the north.

• Educating consumers

For both large commodity processors and smaller farmstead operations, California cheese companies find value in special events, visitor centers and other opportunities to interact with consumers, promote their products and to provide education about the dairy industry.

“California has the benefit of almost 40 million consumers,” Skidmore says. “The challenge is the population is less connected with food sources and helping them understand the importance and contributions of agriculture.”

Hilmar Cheese is a wholesale manufacturer, so while its guests can’t purchase its brand in local stores, its visitor center in Hilmar, California, is focused on education and enjoying cheese. Hilmar also recently added an escape room focused on dairy to immerse visitors in the dairy experience.

“Our gift shop offers our Hilmar labeled cheese, along with a large selection of California farmstead cheeses and international cheeses,” Skidmore says. “The visitor center hosts about 17,000 students on school tours and another 140,000 guests each year to learn about the importance of the dairy industry.”

Point Reyes Farmstead Cheese, which milks about 450 cows — primarily Holsteins — holds several educational programs at its on-site culinary center, The Fork. Wine dinners, cooking classes and cheesemaking classes are among the events that typically will sell out in less than an hour after they are announced on the company’s website.

“Every event starts with a tour of our dairy, the milk barn, nutrition for our cows and renewable energy programs,” Stray explains. “Then they go into the creamery and see how we take the raw material and make cheese. We go back into the culinary center, connecting the dots of what’s happening out on the farm to the plate, and appreciating those flavors.”

The creamery’s cheeses have won national and international acclaim, including at the most recent World Cheese Awards and Good Food Awards. But Stray also credits interest from the surrounding communities as part of what has made Point Reyes Farmstead Cheese so successful.

“There are definitely foodies in our backyard,” she says. “I don’t know if we would have been as successful if we weren’t in the Bay Area from the beginning.”

She adds that there also is a tremendous camaraderie of cheesemakers and other businesses in the area, including the wine and beer industries and groups like the California Artisan Cheese Guild.

“Not every state has a guild, so we’re fortunate to have enough cheesemakers to support that,” Stray says.

• Expanded opportunities

CMAB, which is funded by California’s dairy farm families, also helps the state’s cheesemakers and other dairy processors with marketing and promotional activities throughout the United States and internationally.

Jennifer Giambroni, director of communications, CMAB, notes that several of the state’s cheese manufacturers are in expansion mode, including Greenberg Cheese, California Artisan Products Inc. (formerly Peluso Cheese), Valley Ford Cheese and Point Reyes Farmstead Cheese.

Valley Ford Cheese & Creamery, a farmstead cheese operation in Sonoma County, California, will open a new 5,000-square-foot retail shop in February near its dairy. The shop will feature its company’s products, as well as other local items, a gift shop and bakery, and a private tasting room. The new space also will offer customers viewing of an aging room of its flagship product, Estero Gold Reserve, as well as a brand new cut and wrap room. The company’s shipping and distribution also will be moved to this facility.

“We have nearly doubled production over the past year and are in the process of launching our first line of pasteurized fresh cheeses, so opening a brand new avenue of sales growth couldn’t have come at a better time,” says Joe Moreda Jr., vice president and plant manager, Valley Ford Cheese & Creamery. “We plan on hosting special events at the new facility, group tours, occasional live music, and also acting as a meeting place for industry and community gatherings.”

He adds that the new facility, located on the rural north coast of Sonoma County on Highway 1, is an ideal location for tourists as well as local clientele.

Earlier this year, Point Reyes Farmstead Cheese opened a new processing facility in Petaluma, California, that doubles its cheesemaking capacity. It continues to make its Original Blue from the raw milk of its own herd at the Point Reyes creamery, while its pasteurized Bay Blue, Point Reyes Toma and Gouda production have moved to the new facility in Petaluma, which sources milk from local dairies. Stray adds some new products also are in the works at the new plant.

“We’ve solved one of our challenges by adding the second creamery, where we are able to expand and get closer to our customers,” Stray says. “In Petaluma, we’re right next to the 101 freeway, which is closer to customers and better for freight. We’re always looking at how to serve our customers better.”


October milk production in major states up 1.0 percent

Nov. 23, 2018

WASHINGTON — October milk production in the major 23 milk-producing states totaled 16.87 billion pounds, up 1.0 percent from October 2017, according to data released this week by USDA’s National Agricultural Statistics Service (NASS).

September revised production, at 16.40 billion pounds, was up 1.5 percent from September 2017. The September revision represented a decrease of 2 million pounds or less than 0.1 percent from last month’s preliminary production estimate. (All figures are rounded. Please see CMN’s Milk Production chart.)

Production per cow in the 23 major states averaged 1,934 pounds for October, 20 pounds above October 2017. This is the highest production per cow for the month of October since the 23-state series began in 2003, NASS says.

The number of milk cows on farms in the 23 major states was 8.72 million head, 8,000 head less than October 2017 and 1,000 head less than September 2018.

For the entire United States, milk production during October totaled 17.91 billion pounds, up 0.8 percent from October 2017. Production per cow in the United States averaged 1,912 pounds for October, 21 pounds above October 2017.

The number of milk cows on farms in the United States was 9.37 million head, 30,000 head less than October 2017 and 2,000 head less than September 2018.

California led the nation’s milk production with 3.36 billion pounds of milk in October, up 3.2 percent from its production a year earlier. Production per cow in California averaged 1,940 pounds in October, up 70 pounds from October 2017. The state was home to 1.73 million cows in October, 10,000 head less than October 2017 but unchanged from September 2018.

Wisconsin followed with 2.54 billion pounds of milk in October, down 0.3 percent from its production in October 2017.

Average production per cow remained unchanged from the previous October at 1,995 pounds, but cow numbers were down. Wisconsin was home to 1.27 million cows in October, down 4,000 head from October 2017 but unchanged from September 2018.


Farm bill, funding bills on the docket for lame duck session

Nov. 16, 2018

WASHINGTON — Congress returned to Washington this week and faces a list of priorities to address over the next four weeks, Notably for dairy, the new farm bill and appropriations legislation are expected to be addressed.

News reports say House agriculture leaders met Monday on the farm bill but reportedly emerged without much progress to speak of.

House and Senate Agriculture leaders are hoping to strike a bipartisan deal in time to pass a final farm bill before January, but they are competing for floor time with other big-ticket issues, news reports say.

Jim Mulhern, president and CEO of the National Milk Producers Federation (NMPF), urged Congress to make passing a new farm bill a top priority in its lame duck session, saying that dairy farmers harmed by low prices would benefit from the certainty and improvements likely to be part of the final law.

“Given the sustained low prices dairy farmers have faced, coupled with uncertainty in agricultural trade policy, it is more important than ever that Congress quickly enact the 2018 Farm Bill before adjourning for the year,” Mulhern says. “Both the House and Senate-passed bills make important reforms to dairy policy, making the Margin Protection Program a more effective safety net for producers and expanding producer access to additional risk management options.”

NMPF, whose member cooperatives produce the majority of milk in the United States, commended House and Senate Agriculture Committee leaders for working to negotiate a final 2018 Farm Bill this year.

“We are grateful for the hard work the bipartisan leaders of the House and Senate Agriculture Committees have put in to get us to this point,” Mulhern says. “We stand ready to work with them and their colleagues in the coming weeks to get the job done.”

Congress also still needs to fund large portions of the government by Dec. 7, when a temporary funding measure expires.
News reports say the debate over a final fiscal 2019 agriculture-FDA spending bill could include a battle over Agriculture Secretary Sonny Perdue’s plans to relocate the Economic Research Service and National Institute of Food and Agriculture out of Washington next year.

Dozens of public health, agriculture and research groups are pushing House and Senate appropriators to include a provision in the upcoming spending measure that would delay the move until an independent cost-benefit study is conducted and public hearings are held, news reports say.


Dairy industry requests additional farmers aid as tariffs continue

Nov. 16, 2018

WASHINGTON — Dairy stakeholders are urging USDA to provide additional aid to farmers who are still struggling under the weight of retaliatory tariffs.

USDA is expected to announce the next round of trade aid for farmers negatively impacted by retaliatory tariffs on or around Dec. 3, news reports say. Producers who already applied and qualified for the first $4.7 billion in direct payments will automatically be eligible for the next batch, according to USDA’s Farm Service Agency (FSA). FSA says the application will remain open until Jan. 15.

The National Milk Producers Federation (NMPF ) last month urged Agriculture Secretary Sonny Perdue to consider four separate analyses into trade-related dairy losses that each indicate damages of more than $1 billion when USDA calculates its second round of trade-mitigation payments.

In addition, FarmFirst Dairy Cooperative recently sent a letter to Secretary Perdue on behalf of its dairy farmer members across the Midwest, requesting that the mitigation payments to U.S. dairy farmers more accurately reflect the cost of the retaliatory tariffs placed on U.S. dairy products.

“We appreciate your effort to implement a trade mitigation package to support dairy farmers recognizing the harmful effects these retaliatory tariffs have on farmers,” John Rettler, cooperative president, states in the letter. “However, that mitigation package calculates only $127 million in payments to dairy farmers, or $0.12 per hundredweight on one-half of annual production.”

FarmFirst says recent studies have shown that the cost to U.S. dairy farmers is far greater than what USDA is currently calculating. In fact, the USDA’s World Agricultural Supply and Demand Estimates report released last week showed an estimated loss to dairy farmers of $1.5 billion, FarmFirst says.

“Your dedication to improve market access for America’s farmers is consistent with our desire to derive farm income from the domestic and global marketplace,” the letter says. “Dairy farmers have endured exceptionally low milk prices over the last several years. Specifically, 18 percent lower from 2015 to 2017 compared to the average price farmers received from 2011 to 2014. Farmers were managing through this low point and believed the markets would come around.”

The opportunity for dairy farmers to recover from these low prices was spoiled earlier this spring when the dairy markets reacted after these retaliatory tariffs were imposed, FarmFirst adds.

With the potential of a second payment being made later this year by USDA, FarmFirst Dairy Cooperative is requesting that the calculation be adjusted so that the mitigation plan more accurately represents the financial harm that has been placed on dairy farmers.

“Dairy farmers are independent, strong and savvy when it comes to managing their farms,” Rettler says. “Yet, continued downward market pressure without relief will continue to push several dairy farms out of business, negatively affecting their rural communities and industries that serve them.”


Hearing begins on impact of USMCA; IDFA’s Dykes testifies

Nov. 16, 2018

WASHINGTON — The U.S. International Trade Commission held a two-day hearing this week to investigate the likely impact of the U.S.-Mexico-Canada Agreement (USMCA) on the U.S. economy, specific industry sectors and consumers. Michael Dykes, president and CEO of the International Dairy Foods Association (IDFA) was among several industry groups and stakeholder representatives providing testimony at the Nov. 15-16 hearing.

In his testimony, Dykes outlined the importance of global trade and new free trade agreements to the U.S. dairy industry. He notes that the United States now benefits from a dairy trade surplus of more than $2 billion, after being a net importer of dairy products only a decade ago, and that U.S. companies export dairy products to more than 140 countries.

“Free trade agreements like the USMCA that open markets and lower trade barriers are crucial to continuing this trend of growing U.S. dairy exports,” Dykes says. “Maintaining and expanding access to international markets is essential for the future success of the U.S. dairy industry.”

• Mexico

U.S. dairy exports to Mexico now account for one-quarter of total dairy exports supporting nearly 30,000 American jobs, Dykes points out, calling Mexico “an indispensable partner” for the industry. In 2017, Mexico imported more than $1.3 billion of U.S. dairy products.

Dykes adds that the industry is pleased that the agreement preserves duty-free market access to Mexico and contains geographical indications (GI) provisions within the intellectual property chapter to protect the use of certain common food names, such as gouda and mozzarella, by U.S. cheesemakers. However, he says the dairy industry had hoped the GI provisions would go further to protect more of these names such as asiago and others that remain unclear.

Additionally, U.S. tariffs on steel and aluminum imports from Mexico are having a negative impact on dairy exports because Mexico has imposed retaliatory tariffs of 25 percent on U.S. cheeses, IDFA notes.

“We’ve seen sales decline 20 percent for cheese in July, August and September due to the tariffs,” Dykes says, adding that until these are lifted, “U.S. dairy’s access to the Mexican market is at risk.”

• Canada

Dykes in his testimony commended the Office of the U.S. Trade Representative for “negotiating strong transparency provisions that hold Canada accountable for publishing data and notices on a public website in a timely manner. This is critical for monitoring and enforcing the USMCA.”

While Dykes notes that the agreement appears to have addressed Canadian dairy policy measures that restrict market access, he cautions that the corrections need to be monitored and enforced.

Canada’s current dairy ingredients pricing strategy includes a Class 6 program that effectively blocks U.S. ingredients from entering the Canadian market and a Class 7 program that allows Canada to export surplus skim milk powder at prices below the cost of production. Although the new agreement will eliminate the Class 6 and 7 programs, Canadian processors still will be able to use Canada’s “make allowance” formula, or processor cost, that is nearly double the U.S. version. This formula will allow large processor margins that will drive expansion and provide Canadian dairy-protein processors a competitive advantage over U.S. companies, IDFA says.

The new agreement also calls for duty-free quotas in Canada for the majority of U.S. dairy products, but Dykes warns that the Canadian dairy industry could find ways not to fill the quotas.

“There’s precedent for Canada not to fill quotas. Several World Trade Organization quotas are routinely left unfilled for milk protein substances and products of natural milk constituents,” Dykes says. “For these reasons, we believe that actual market access for the U.S. dairy industry to the Canadian market could be much lower than what was negotiated.”


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Today's Cheese Spot Trading
December 13, 2018

Barrels:$1.2950 (+1 3/4)
Blocks: $1.3950 (+4 3/4)

Click here for more market activity
Cheese Production
U.S. Total Oct.
1.119 bil. lbs.

Milk Production
U.S. Total Oct.
17.905 bil. lbs.

Guest Columnist

One final push for UW River Falls

John Umhoefer, Wisconsin Cheese Makers Association

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