Block Cheddar cheese hit the highest price in almost five years and is the highest priced cheese in the world. It closed “Friday the 13th” at $2.2050 per pound, up an astounding 20 3/4-cents on the week, the highest since October 22, 2014, and is 60 cents above a year ago, as traders anticipated the August Milk Production report on Sept. 18. It’s still 24 1/2-cents shy of the record high block price of $2.45 on Sept. 19, 2014.

 The barrel price finished at $1.92, up 17 3/4-cents, highest since Nov. 12, 2014, 50 cents above a year ago.

FC Stone dairy broker Dave Kurzawski explained in the Sept. 16 Dairy Radio Now broadcast that tightened milk supplies resulting from crimped margins on U.S. dairy farms the past few years meant lower cheese output. That plus Class IV milk prices have topped Class III prices which pulled some milk from the cheese vat, resulting in lower Cheddar output. He also credited “very strong domestic cheese demand,” for the high prices.

U.S. cheese and butter exports have been hindered by the strong prices but are not a total disaster. Kurzawski also reported that China announced this week that it would suspend its tariffs on U.S. whey on Sept. 17. China has been buying more U.S. lactose the last couple months, he said, as “They’re going to try, come hell or high water, to rebuild their hog herd,” which was devastated by African Swine Fever. Kurzawski said it will be a slow process but “The U.S. is well positioned to help them.”

The cheese price was the topic of the week, according to Dairy Market News, but contacts are concerned what markets will do in the near future. Some expect a sharp fall-off while others question where the ceiling is. Midwest cheese sales remain healthy, even with the price upticks and inventories are in balance.

Western cheese makers have plenty of milk and are running plants near full capacity. Strong seasonal pizza demand is particularly promoting production of mozzarella and the wide price spread is encouraging block production. Some contacts are trying to make sense of the lift in prices, especially for the blocks. They see demand as adequate to keep stocks from ballooning but export demand has been stifled by the higher prices compared to world prices. Contacts also suggest that supplies of block cheese that meet CME market requirements are limited, giving a push to prices. Demand has been strong for block cheese with some suppliers heavily committed over the next few months, reports DMN, but with “languid consumer demand for processed cheese, there is currently no shortage of barrels and 640s.”

The big question is how well the market can regain a balance, says DMN. Block and barrel prices may moderate somewhat but the concern is that stronger milk prices and cheap feed may incentivize more milk production and, subsequently, more cheese. A few contacts suspect that without the potential for new market opportunities the U.S. may again have a lot of cheese that is hard to sell.

Spot butter, perhaps buoyed by the cheese, climbed to $2.2350 per pound Wednesday but backed off to close at $2.2225, up a nickel on the week but 1 1/4- cents below a year ago. A hefty 55 cars traded hands on the week.

Butter producers differ on the effect of lower market prices in terms of demand. Some say orders are picking up while others say demand remains quiet. The cream picture has remained similar. It is available, plants are taking advantage of the accessibility, and producers are working on 2020 cream contracts.

July U.S. fluid milk sales staged a small uptick, first positive move since April 2018. USDA’s latest data shows 3.6 billion pounds of packaged fluid sales in July, up 0.2 percent from July 2018.

Conventional product sales totaled 3.4 billion pounds, down 0.1 percent from a year ago. Organic products, at 217 million pounds, were up 4.6 percent and represented a tad under 6 percent of total sales for the month.

Whole milk sales totaled 1.3 billion pounds, up 3.6 percent from a year ago and made up 35 percent of total fluid sales in the month. Sales for the seven month period totaled 8.7 billion pounds, up 1.2 percent from a year ago. Skim milk sales, at 265 million pounds, were down 8.1 percent and made up 7.3 percent of total milk sales for the month.

Total packaged fluid milk sales, January through July totaled 26.6 billion pounds, down 1.8 percent from a year ago.

The US Dairy Export Council’s President and CEO Tom Vilsack has returned from a seven-day trip to China and Japan, saying he is “optimistic about the long-term health of U.S. dairy exports despite challenges caused by current trade disputes.” “With hard work and patience, we will continue to grow both volume and value for the U.S. dairy industry,” Vilsack wrote in a letter to members, sharing takeaways from his trip. “We are on the right track to compete to win.”

After meeting with U.S. dairy suppliers and customers in China, Vilsack said “The reality of why U.S. dairy exports to China have fallen 43 percent over one year was brought home. Exports have been hit by a one-two punch of retaliatory tariffs and the spread of African Swine Flu that has killed much of China’s pig population, reducing the need for feed that utilized U.S. dairy ingredients.”

“In that environment the best we can do is look for ways to maintain the relationship in the hope that the trade dispute gets settled sooner rather than later,” he said, “recognizing we have no control over when or if that will happen.”

The views and opinions expressed in this column are those of the author and not necessarily those of Farm World. Readers with questions or comments for Lee Mielke may write to him in care of this publication.