Friday, January 24, 2020
CapitalPress.com
9
Dairy
DAIRY
MARKETS
Lee
Mielke
Cheese
prices
rally
Mid-January cash dairy
prices remain mixed. The
CME Cheddar blocks
closed the third Friday of
2020 at $1.9625 per pound,
up 9.25 cents on the week,
highest since Dec. 9 and
56.25 cents above a year
ago.
The barrels fell to
$1.4675 last Tuesday, low-
est since March 13 widen-
ing the spread to a second
all-time high of 40.25 cents.
But they rallied, closing
Friday at $1.5625, 4 cents
higher on the week, 36.25
cents above a year ago, and
40 cents below the blocks.
Only 2 cars of block traded
last week at the CME but 40
of barrel.
The
markets
were
closed Monday for Mar-
tin Luther King Day but
the blocks inched a quar-
ter-cent higher Tuesday,
hitting $1.9650, as trad-
ers absorbed the morning’s
Global Dairy Trade results
and anticipated Wednesday
afternoon’s December Cold
Storage report and Thurs-
day’s December Milk Pro-
duction report.
The barrels were up 3.50
cents Tuesday, to $1.5975.
Football-Super
Bowl
cheese orders have kept
demand healthy into Janu-
ary and will support orders
in the near term, predicted
HighGround Dairy in its
Jan. 13 “Monday Morning
Huddle.” But, it warned that
“milk production is plenti-
ful across most areas of the
country, pushing larger vol-
umes into cheese plants who
have resumed normal full
week operating schedules
post-holidays. While cheese
production is strong, decent
demand has mostly kept
pace to support an overall
balanced market, prevent-
ing prices from declining
further.
“Looking ahead, it is
likely that demand will drop
slightly lower on a normal,
seasonal basis throughout
first quarter, and there is
potential for cheese markets
to continue to move lower
as milk output remains
strong throughout the next
several months.”
FC Stone adds that
while the December Milk
Production report won’t
be issued until Thursday,
December component data
is available and was basi-
cally flat against last year.
“Feed quality issues may be
impacting things in a more
meaningful way,” according
to FC Stone.
Meanwhile, Midwest-
ern cheesemakers tell Dairy
Market News that “in spite
of the confused markets,
week to week sales are
mostly steady if not slightly
improved. It is prime time
for mozzarella and provo-
lone sales, with football
playoffs prompting retail-
ers to push cheese/pizza
advertisements.”
Spot milk prices remain
“solely discounted,” how-
ever, discounts are slighter
and moving a bit closer to
Class. Market tones are far
from healthy, says DMN,
citing the block to barrel
price gap.
Western cheesemakers
report cheese demand is
steady but there is plenty of
milk to keep plants running
near full capacity. Cheese
inventories are not neces-
sarily burdensome but some
contacts say they are “heavy
enough.”
With adequate stocks on
hand and abundant milk
supplies, contacts think a
few manufacturers have
shifted production to barrels
from blocks, thus pressur-
ing the cash barrel market.
California dairy farmers in quandary over quota
By CAROL RYAN DUMAS
Capital Press
Two years ago, most of
California’s dairy farmers
were united in retaining the
state’s quota program — a
crucial component in their
efforts to secure votes to join
the federal milk marketing
order system.
Today it divides them.
The quota system came
about in the late 1960s as a
means of compensating milk
producers selling into the
higher-value Class 1 fluid
market to gain their support
for establishing a state mar-
keting order that would pool
milk and distribute payments
more evenly to producers
across all utilizations.
Quota programs don’t
exist in the federal order sys-
tem, but USDA allowed Cal-
ifornia’s quota program to
continue as a stand-alone
administered by the Cali-
fornia Department of Food
and Agriculture. California’s
dairy farmers overwhelm-
Capital Press File
Cows at a California dairy. Farmers are debating the
value of the state’s quota system.
ingly approved the state’s
Quota Implementation Plan
in January 2018.
Under the plan, the state
assesses all grade A milk pro-
ducers 38 cents per hundred-
weight (on standard compo-
nents) and redistributes that
money to quota holders. It
pays up to $1.70 per hun-
dredweight above the state
blend price for the amount
of milk covered by quota
certificates.
The program runs pretty
much the same as it has for
the past 50 years, but it has
fallen out of favor with pro-
ducers who now realize how
much they’re paying into the
program — many with no
return.
Milk producers have
always paid the assessment.
But before California joined
the federal order system, it
was taken off the top of the
pool and producers never
saw the deduction on their
milk checks.
Joining the federal order
brought more transparency
to producers’ milk checks,
and the assessment is clearly
listed — and that’s brought
unrest, said Travis Kamper,
a member of United Dairy
Families of California.
Producers are paying
the same amount they did
before, but now they see it
and they don’t like paying
that much money for the pro-
gram, he said. They pay a
total of about $12 million a
month and have to own quota
on 22% to 25% of their milk
production to break even, he
said.
But it’s more than a cash
flow issue, it’s also an asset
issue, he said.
In the 10 years before the
change to the federal order
system, the quota averaged
$480 per pound of solids-
not-fat, he said.
He said family, friends
and neighbors are on both
sides of the quota issue, and
it can be divisive.
United Dairy Fami-
lies was started to create a
platform to get a consen-
sus in the dairy industry on
the quota’s future. Joined
by three dairy cooperatives
and the Stop QIP Dairy Tax
Coalition, UDFC has held a
series of meetings to solicit
and analyze industry input
to come up with a proposal
that a majority of the indus-
try will support.
Kamper said UDFC
doesn’t have the solution but
would oppose a proposal that
would eliminate quota with-
out compensation.
Stop QIP, however, is
calling for the elimination of
quota. The program holds no
benefit for non-quota hold-
ers or those who hold quota
certificates on less than 25%
of their milk production.
In addition, it only benefits
about 300 producers at the
expense of everyone else, the
coalition contends.
Dairy makes strides in U.S.-China trade deal
By CAROL RYAN DUMAS
Capital Press
While phase one of the
new U.S. trade deal with
China doesn’t deliver tariff
relief, it does promise more
purchases of U.S. agricul-
tural products and provides
resolution on a number of
other issues hindering U.S.
dairy exports to the larg-
est consumer market in the
world.
Phase one doesn’t do
anything to reduce Chi-
na’s retaliatory tariffs, but
it does include a purchasing
commitment of $80 billion
in U.S. agricultural goods
over the next two years,
Shawna Morris, vice presi-
dent of trade policy for U.S.
Dairy Export Council and
National Milk Producers
Federation, said.
“It’s going to be a lot
easier to deliver on that
commitment if China takes
action on retaliatory tariffs
on its side,” she said.
There are two buckets of
issues for the dairy indus-
try when it comes to China
— retaliatory tariffs and
non-tariff trade barriers —
and phase one makes big
strides in non-tariff issues
the industry has been deal-
ing with the last few years,
she said.
For one, USDEC filed
an application in China to
allow whey permeate pow-
der in food products a cou-
ple of years ago and it still
hasn’t gotten approved.
China has agreed to com-
plete that approval process
in phase one of the agree-
ment, she said.
Another key area the
industry has struggled with
is the registration of U.S.
facilities eligible to export
to China. The U.S. Food
and Drug Administration
sends a list of those facil-
ities to China’s customs
administration, which oper-
ates an online database list-
ing registered facilities.
There are very big lags
in China on updating that
list, and that’s a big issue
for U.S. dairy companies.
Through the agreement,
China must adhere to a time
frame of 20 business days
for updating those registra-
tions, she said.
The agreement also
allows sales of U.S. exports
of certain fluid milks, such
as extended shelf life milk
and ultrafiltered milk, and
provides for proper labeling
of those products, she said.
China has also commit-
ted to reducing non-trade
barriers affecting U.S.
exports of infant formula.
The agreement also takes
a big step forward regard-
ing intellectual property
and geographic indications
to make sure those areas
are subject to increased due
process and safeguard pro-
cedures, she said.
China has agreed to pro-
hibit the unauthorized dis-
closure of information,
trade secrets or confiden-
tial business information,
according to the U.S. Trade
Representative’s office.
It has also committed
to prohibiting future trade
deals with other countries
from using geographic indi-
cations to undermine mar-
ket access for U.S. products
using common food names,
such as feta cheese. The
agreement also preserves
the ability for the U.S. to
challenge and pursue can-
cellation of any GI applica-
tions and lays out indicators
of generic status.
“It very much is a good
deal in terms of tackling
these non-tariff barriers,”
Morris said.
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