Market Reports

Buyers doused a little lighter fluid on the barrel market, helping to narrow the still-wide deficit to block prices. They still have a lot of ground to make up. Strong volume at these higher prices suggests cheese demand is firm. The dairy market recovery could continue for a while.

U.S. dairy product exports fell well short of the record-high volumes set in April 2018. Rising prices, the strong dollar, and increasingly acrimonious trade relationships combined to stifle foreign buyers’ appetite for dairy products made in America. Still, year-to-date exports are the third-highest ever. For dairy producers, feed quality and availability may be a bigger issue, especially for forage.

President Trump announced that the U.S. will impose a 5% tariff on all Mexican imports beginning June 10. Even if Mexico does not retaliate with a tariff on dairy products there are important consequences for the U.S. dairy industry. For now, however, global demand seems strong.

The dairy markets have come a long way in the past few months. But while lower milk output and firm demand are clearly underpinning prices, the bulls must be fed with fresh news every day. In the absence of additional fodder, the rally will quickly lose steam.

Are dairy producers turning their sights toward expansion? The United States, Mexico, and Canada have reportedly reached a deal to waive the Trump tariffs and it’s likely that Mexico will drop the punitive border tax on cheese. However, the trade headlines came too late to prevent a setback in spot Cheddar.

It was another wild week on LaSalle Street, as traders focused much of their attention on Pennsylvania Avenue. For now, however, milk output is in decline around the world. Dairy producers can enjoy much higher milk prices even as exports slip.