There have been some interesting shifts in the global trade of dairy products that aren't apparent on the surface. Chinese milk-equivalent import growth slowed from 13% in the first quarter of 2019 to an estimated 1.7% in the second quarter.
Yet again, European Union (EU) intervention stocks of skim milk powder (SMP) have effectively been drawn down to zero. When this happened in 2007, EU and U.S. prices ran up to new record highs.
Exports are a demand-pull phenomenon, and demand has been good. U.S. milk equivalent exports from January to July were record high, up 19.5% from 2017.
On May 31, Mexico announced retaliatory tariffs on U.S. cheese, and then on June 16, China announced retaliatory tariffs against most U.S. dairy products.
What are the top four indicators we should be watching to help us understand and anticipate changes in dairy prices? With the amount of data and commentary on the dairy markets, it's easy to get overwhelmed or become distracted from the big underlying drivers. It was hard to whittle the list down to just four, but here they are.
Don't get distracted by the headlines in 2018. The renegotiations of the North American Free Trade Agreement and the U.S.-Korea free trade agreement will demand a lot of attention, but assuming neither of them is wiped off the board completely, growing milk supplies in the other major exporting countries will create the headwind for U.S. exports.