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If Mexican and Chinese tariffs go into full effect this coming Saturday, the futures market, USDA and other analysis suggest they could take $1.10/cwt off your milk price in the second half of 2018.

“…dairy futures estimated the average price impact [of Mexican and Chinese tariffs] during the second half of 2018 as a loss of about $1.10/cwt,” say National Milk Producer Federation economists writing in their June Dairy Market Report. “A more formal economic analysis point to about the same affect,” they say.

Nate Donnay, director of dairy market insight with INTL FCStone,estimates tariffs would curtail U.S. exports by about 41,000 tanker loads per year, or 113 loads per day. The percentage is actually small, 0.8%, “But it is finding a buyer for that last load of milk, cheese or powder that will set the price,” he says.

If there’s any good news, both the futures market and USDA expect milk prices will still rise through the second half of 2018, due likely to slowing milk production. Two weeks ago, both the market and USDA were projecting an average all-milk price of $16.80/cwt for all of 2018. That’s about 50¢/cwt lower than 2017.

“It may be that the worst of the news affecting the dairy outlook, following the tariff retaliatory announcements, is already baked into the futures,” say NMPF economists. If that’s the case, there could be more upside market potential going forward, they say.

“Reprinted by permission of Farm Journal media, July 2018”

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