December 3,2108-
Despite a glum picture painted by the dairy trade media, California milk producers are pumping out more milk The state’s milk production jumped 3.2% in October says USDA as Bessy was more productive. So why the long faces? – red ink says the latest downbeat report from the California Milk Producers Council released Friday.
“Dairy producers are dejected, and it’s easy to see why. December Class III milk settled today at $13.98/cwt., a new low for the contract. You can’t make milk for $14, especially with lower premiums and greater hauling deductions than in the past. There are wait lists to move cows to the slaughterhouse and the sales yard. USDA reports that the dairy producers received an average of $1,230 per head for replacement heifers sold in August through October, the lowest value in 20 years.”
Reports say dairy farmers, hit by retaliatory charges, are selling their family businesses.
Retaliatory tariffs by China and Mexico could lower dairy exports by $2.7 billion and depress dairy farmers’ revenues by $16.6 billion over the next several years unless they are rolled back. Moreover, U.S. economic output tied to the dairy industry would fall by more than $8 billion and 8,200 U.S. jobs would be imperiled through 2023.
Those findings are according to a study commissioned by the U.S. Dairy Export Council and conducted by Informa Agribusiness Consulting that estimated the economic impact of ongoing trade disputes on the U.S. dairy industry. The study only examined current tariffs, meaning the damage would worsen if other proposed duties take hold. This weekend’s news that there is a truce in the trade war with China doesn’t affect the duties still in place that are hurting US dairy farms.
Tulare County milk production continues to climb
Tulare County, the nation’s top dairy county, has 24 fewer dairies in 2018 vs 2015 according to state figures. Total number of dairies here are 258 as of January 2018 down from 282 in 2015. There are some 5000 fewer cows as well.
Still Tulare County leads the nation in dairy production. It amounts to 27% of California milk volume- up from 23% in 1999. But is it on the wane as news reports appear to imply?
Milk produced in Tulare County was down 1.3% in 2017 vs 2016. But in the first six months of 2018 Tulare’s milk production reversed the trend and climbed 1.1 percent says CDFA compared to the same period in2017. In September 2018 milk volume climbed at 3% .
As of November 1 California dairies now sell their product through the federal order, a move they expect will offer a bump-up in price, perhaps 40 to 60 cents higher for cheese milk, where much of the milk goes.As of October the state’s milk volume and cow numbers are both up as Golden State dairymen gear up to make more milk under the new system.
On the downside of things tariffs on product heading to Mexico and China are still in place. While we continue to sell more non-fat dry milk to Mexico – up 26 percent, year-to-date – cheese exports to Mexico are down 21 percent.
The Trump administration has not lifted the steel and aluminum tariffs on Mexico so Mexico will not eliminate the 25 percent tariffs on U.S. cheese. That hasn’t changed despite a new trade agreement among North America’s three nations that was announced at the end of September.
Domestically, fluid milk consumption continues to decline with Calif Class 1 sales for all beverage milks down 8% from a year earlier. Organic milk is no better, maybe worse, down 15% in September year-over-year. What’s up- cheese, particularly mozzarella with sales in Sept up 9%. Monterey cheese and Hispanic cheese are also up this year.
Pork’s Trade War Price Tag: $1.5 Bil
The National Pork Producers Council (NPPC) called for an end to a trade dispute that has cost U.S. pork producers an estimated $1.5 billion this year, according to Iowa State University Economist Dermot Hayes.
“We are very pleased with the new trade agreement with Mexico and Canada, one that preserves zero-tariff pork trade in North America for the long term,” said NPPC President Jim Heimerl, a pork producer from Johnstown, Ohio. “But, it’s imperative that we remove U.S. tariffs on Mexican metal imports so that retaliatory tariffs of 20 percent against U.S. pork are lifted.”
Dr. Hayes estimates that live hog values this year have been reduced by $12 per animal due to retaliatory tariffs imposed by Mexico against U.S. pork in June. The loss estimate of $1.5 billion is based on an expected total harvest of 125 million hogs in 2018. These tariffs, along with China’s retaliatory tariffs, have turned what promised to be a profitable year into a year of losses for export-dependent U.S. pork producers. Dr. Hayes estimates U.S. pork producer losses of $ 1 billion, or $8 per animal, from the ongoing trade dispute with China.
Mexico and China represent approximately 40 percent of total U.S. pork exports.
Cotton Prospects Down
Those 25% Chinese tariffs on U.S. cotton imports are making their mark on 2018/19 cotton exports. Despite exceptional commitments of 8.2m bales to begin the 2018/19 season, the pace of U.S. exports has slowed considerably vs. previous years. Chinese cancellations have occurred in the past five consecutive weeks. With weaker cash prices, mill forward purchases are likely to take a backseat in the short term – ultimately returning as demand confidence is reinstated says a Rabobank forecast. Southeast Asian demand to remain robust, but softer Chinese demand will keep export sales sluggish.