Board members of Agri-Mark, a major dairy cooperative in the Northeast, are asking for federal support for the U.S. dairy industry in light of burdensome supplies and tariff wars that have sent milk prices plummeting. The co-op has also scheduled a national meeting for mid-August to consider policy and market options as dairy farmers struggle through another year of below-breakeven milk prices.

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Dave Natzke
Editor / Progressive Dairy

In a June letter to USDA, the Agri-Mark Inc. board asked U.S. Ag Secretary Sonny Perdue to set minimum wholesale price floors for butter at $2.30 per pound, cheddar cheese at $1.64 per pound and nonfat dry milk at 81 cents per pound. As part of the program, USDA would purchase any dairy products offered to the government at those prices. Headquartered in Andover, Massachusetts, Agri-Mark markets milk for 1,000 dairy farm families in New England and New York.

Rising dairy futures and cash prices, which had provided some optimism for the second half of 2018, have fallen as trade wars with China, Canada and Mexico escalated. In June, the U.S. announced new tariffs on products from China, Mexico, Canada and the European Union. In turn, Mexico put tariffs of up to 25 percent on U.S. cheeses; China announced tariffs against a list of products, including a 25 percent tariff on most U.S. dairy products; and Canada has imposed retaliatory tariffs of 10 percent on U.S. yogurt.

“After more than three years of extremely low income, farm milk prices were finally rising earlier [in June] with strong cheese, butter and nonfat dry milk market prices. When tariffs were announced, prices collapsed overnight,“ said Neal Rea, a dairy farmer from Cambridge, New York, chairman of the Agri-Mark board.

Chicago Mercantile Exchange (CME) Class III futures prices for August-October 2018, which averaged $16.95 per hundredweight (cwt) on May 22, fell to an average of about $14.97 per cwt on July 9. The August Class IV futures price at $16.24 per cwt on May 22; the August-October Class IV futures price averaged $14.39 per cwt on July 9.

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There were similar trends in cash markets. CME cash Grade AA butter closed at $2.415 per pound on May 25, falling to $2.17 per pound on July 6. Cheddar barrels and blocks closed at $1.545 and $1.61 on May 25, falling to about $1.26 and $1.54 per pound, respectively, on July 9. Grade A nonfat dry milk closed at 84.25 cents per pound on May 25, falling to 77 cents per pound by July 9.

Any tariff-related disruptions in the export pipeline would flood the U.S. market and force farm prices down even further, said Agri-Mark economist Robert Wellington.

The latest USDA Cold Storage report estimated total natural cheese stocks as of May 31, 2018, were up 3 percent from the previous month and up 6 percent from May 31, 2017. Natural American cheese in storage in the U.S. was estimated at 804.7 million pounds. Butter stocks were up 10 percent from the previous month and up 8 percent from a year earlier.

“Mexico is the largest buyer of U.S. dairy products, and both China and Canada are in the top five,” Wellington said. “Dairy farmers have worked hard to grow export markets and be a steady supplier of top-quality dairy products to the world. Dairy farms support our rural economies, and USDA needs to take action now before more of these families go out of business. Dairy farm families, their neighbors and all of rural America are suffering,” said Wellington.

Meeting planned for Aug. 13

Agri-Mark called for a national meeting of producers, co-op leaders and lawmakers to discuss options going forward. The meeting has been set for Aug. 13, 8:30 a.m. to 5 p.m., at the Empire State Plaza Convention Center, in Albany, New York.

Agri-Mark is inviting policy and marketing ideas prior to the meeting and will post them on a meeting webpage a week prior to the meeting. One-page summaries of the ideas should be submitted via email to Wellington. Ideas will be discussed at the meeting, and copies of the submitted proposals will be made available at the meeting.

There is no fee to attend, but advance registration is requested. Registration and more detailed information is available at the Agri-Mark website. The website will be updated as more information becomes available.

USDA buys cheese for feeding programs

Separately, in late June, the USDA’s Agricultural Marketing Service awarded purchase contracts totaling 9.1 million pounds of chunk and shredded natural American cheese. Total value of the purchases was $19.3 million. The cheese, purchased for USDA domestic food distribution programs, was scheduled for delivery in July-September 2018.

Prices paid ranged from $2.2388 to $2.3948 per pound for cheddar chunks, $1.9145 to $2.1018 for shredded cheddar in 5-pound bags and $2.241 to $2.4450 for shredded cheddar in 2-pound bags.

Companies awarded contracts included:

• Associated Milk Producers Inc., 3.96 million pounds at a total cost of $7.87 million

• Bongards’ Creameries, 1.08 million pounds at a total cost of $2.58 million

• Dairy Farmers of America, 2.07 million pounds at a total cost of $4.22 million

• Masters Gallery of Foods, 2.03 million pounds at a total cost of $4.65 million  end mark

Dave Natzke