Increasing tension over trade in the first half of May led dairy manufacturers to begin selling off inventories. Many cooperatives had been building inventories of various products in anticipation that a trade deal between the U.S. and China was close, but that anticipation has given way to concern as import duties of up to 25 percent remain in place on various dairy exports to China.  

Dairy traders were decidedly bullish heading to the American Dairy Products Institute annual conference in Chicago during first week of May. However, the industry’s cautious optimism has faded that timely trade deal would spur exports to China, and there is a push now to convert some physical inventory to working cash. As a result, nonfat dry milk futures have fallen from a high price of $1.0850 per pound down to $1.01 as of May 20Also interesting is the exchange of inventory control from manufacturers and traders to commercial end users.  

Nonfat dry milk futures vs. average spot pricing 

Source: DTN, USDA