October 1, 2018

New Deal With Mexico And Canada Spurs Higher Markets

 |  By: Know Your Market

The talk of Monday was certainly the new deal that was struck just before midnight on Sunday to meet the deadline for an agreement between the United States, Mexico and Canada. 


The new deal will be called the USMCA U.S. Mexico Canada agreement and, like the earlier deal with Mexico, largely centers around vehicles. Forty percent of a vehicle must be made by a worker earning at least $16 an hour and 75% of the parts must be made in North America. The good news for dairy is that U.S. farmers will now have access to 3.5% percent of Canada's $16 billion-dollar year market. 


The biggest way that Canada is creating this access is by eliminating its class-six and class-seven milk prices, which gain their greatest attention last April when certain products like ultra-filtered milk and cream we're all but denied access by way of drastically increased tariffs. However, those will not be repealed until six months after the new deal is implemented. Based on current timelines, it may not be until 2020 that the borders effectively reopen for U.S. dairy products. 


With this news came a higher spot trade. Blocks rose 5 and three-quarter cents to finish at $1.74 and three-quarters, while barrels rose 3 and three-quarters cents to finish at $1.42. In the wake of this trade, the spread moves to a record width of 32 and three-quarter cents. Grade A nonfat dry milk rose a half cent to finish at 88 cents a pound while butter dropped 2 and a quarter to finish the session at $2.29 and three-quarters way remained unchanged at 55 cents. 


In the flurry of good news Class III milk market was only able to eke out a 6 cent gain and its average of the fourth-quarter, rising to $16.14, while next year's average rose 6 cents as well to $16.23.