By  E. W. Lang

The United States and China signed a "Phase 1" trade deal on Wednesday. All the people rejoiced as the markets yawned.

Corn lost a couple cents after the agreement was signed, then lost several more on Thursday and gained most of it back today. Soybeans likewise, so did wheat. Steers and hogs followed suit.

Milk was a different story. February Class III Milk Futures started Wednesday morning at $16.82 per cwt., then gained 23 cents. Thursday brought another 22 cents, and Friday added another 13 to close the week at $17.43. Bear in mind that the Senate had just passed a Canada-USA-Mexico trade agreement which allows some more US milk to go north of our border. It gets us back to where we were three years ago on dairy exports to Canada.

So, can these two trade deals be credited for the recent 55 cent increase in February milk? Of course they can... if we want them to. I can also credit the cold weather and ice storms caused by global heating change, or I could just credit recent market choices regarding the need for milk as it relates to how much milk is available. For the week as a whole, February Class III MIlk Futures are up 40 cents.

The USMCA (Canada-USA-Mexico) trade agreement is a plus for milk producers over time. U.S. milk producers, that is. For most of agriculture, this agreement does little more than did the old NAFTA that governed for years. USMCA addresses the Canadian Class 7 milk thing as it pertains to a modest amount of milk, and puts in writing some other stuff about what goes across our northern and southern borders. Mexico also has to abide by some labour rules that probably can't be monitored or enforced. The USMCA still has to be approved by the Canadian legislature.

Wednesday's Phase 1 agreement with China had a lot to do with signing it during the same news cycle that saw Articles of Impeachment delivered to the Senate. It also does a couple other things, as it makes it easier to move money between countries, so buying and selling will be faster and easier.

It further eases regulations on moving products between countries. If I want to sell a big, strong, healthy Holstein bull calf to my farmer neighbor I say, "That will be $15. Thank you very much. Please to come again."

If I want to sell a case of butter to someone in China, there is a lengthy, arduous process, complete with silly regulations and restrictive, archaic rules. The Phase 1 agreement eliminates a lot of that, but doesn't eliminate or reduce any tariffs. As such, United States' dairy products are still subject to 27% to 45% tariffs in order to enter China. Key point there.

Phase 1 also came with some rhetoric regarding billions of dollars in pork and beans, chickens and cows, and other farm goods. It also includes some loose language, further subject to interpretation, that allows both parties to circumvent almost anything... or everything, if needed. So, if 'ifs' and 'buts' were sausage and nuts, ag would trade a lot more with the Reds.

If you want a comprehensive overview for farmers, Farm Journal has a good one.

https://www.agweb.com/…/phase-1-china-deal-what-you-need-kn…

For the week, 2020 Class III Milk Futures average $17.60 per cwt., up 19 cents since Friday. Class IV Futures for the year average 36 cents over Class III.

Block Cheese closed today at $1.96 per lb., up nine cents for the week. Barrel Cheese closed at $1.56 per lb., up four cents. That 40 cent spread is a lot. Butter at $1.88 per lb. is down four cents since Friday.

Milk cow and hay prices were called steady from the previous week

Government Farm Subsidies are on the way.    The 2019 MFP Tranche 3 is coming soon.  There's one for crops and one for dairy herds.   Agriculture Secretary Perdue said not to count on a MFP in 2020, in light of the recent trade deals.  Monthly DMC payments for the next several months seem unlikely, given future milk revenues over the cost of grain and hay. 

U.S. dairy exports during November were valued at $530 million, up 22% from November 2018, according to figures released Tuesday by USDA’s Foreign Agricultural Service. That marked the third straight month in which the value of U.S. dairy exports topped $500 million. I wonder how that even happened, since we didn't have the USMCA or that China deal.

WTI Crude Oil traded at  $58.52 per barrel, down 0.9% for the week, and all major indices on the NY Stock Exchange are at or near record levels.

I look forward to my second annual pilgrimage to the Ft. Worth Rodeo and Stock Show. Dairy Agenda Today will be covering the dairy shows, and I will be looking at bolo ties and cowboy hats, hoping my wife, Mrs. Lang, will allow me to buy one. .