Prices were extremely low this spring, dropping below $14 per hundredweight (cwt) in February for many farms. Since then, prices have modestly improved and will likely continue to do so for the remainder of the year. They are projected to then remain stable into the first half of 2019.
|2016||2017||2018 (March forecast)||2018 (June/July forecast)||2019 (forecast)|
|Boston Blend Price1||15.90||17.44||16.02||16.29||17.72|
|Avg. WNY Blend2||14.84||16.40||15.20||15.26||16.18|
- U.S. milk production grew 1.4 percent year-over-year in August, due to increased productivity. There were gains in California (1.2%), New York (1.7%), Wisconsin (1.4%) and Idaho (0.9%), and reductions in Pennsylvania (-2.6%), Vermont (-0.9%) and Michigan (-0.6%).
- National cow numbers decreased year-over-year (-4,000 head). New York was down 2,000 head from last year at 622,000.3
- U.S. dairy exports remain strong, although there have been some trade disruptions. Overall, total August U.S. dairy exports were worth $481 million, three percent above one year ago. For the year through August, dairy exports are 17 percent higher by volume, and four percent higher by value. Exports were led by Mexico’s strong buying of powder, but partially offset by a large decrease in imports by China. Exports to China were the lowest in two years, in response to new tariffs that have taken effect.4
- It is believed that the new United States-Mexico-Canada Agreement (USMCA) trade deal, which still requires ratification by lawmakers in each of the three countries, will benefit U.S. dairy, although the impacts may be fairly modest. Mexico represents the largest customer for U.S. dairy exports, making up about 25 percent. After the U.S. placed tariffs on aluminum and steel imports, Mexico retaliated with a 25 percent tariff on many U.S. dairy products. Even with the USMCA, those tariffs remain. There are also issues regarding geographic identity labeling for some popular cheeses, which has been pushed by the European Union. Such rules would restrict certain names for use by specific production regions, for example, requiring Parmesan cheese to come from the Parma region of Italy.
- The USMCA would remove Canada’s “Class 7” pricing, which made it cheaper for Canadian processors to purchase ultra-filtered milk domestically, and effectively shut down a burgeoning specialty market for the U.S. The U.S. will be able to export the equivalent of 3.6 percent of Canada’s dairy market, an increase from the existing level of one percent. Estimates indicate that this could increase dairy exports to Canada by more than 600 million pounds annually by year six of the agreement.
- Signups for the Dairy Revenue Protection program (DRP) opened on October 9 for 2019 coverage. Farm Credit East recently hosted a webinar on dairy risk management programs; click here to view this webinar.
- Despite strong exports and domestic demand for processed dairy products, milk marketing arrangement issues continue. Some farms have either lost markets or are concerned that they will lose milk markets due to ongoing adjustments by processors and handlers.
1 Agrimark Price Forecast, 2018-19
2 Upstate Niagara Price Forecast, 2018-19
4 U.S. Dairy Export Council