By Lee Mielke

Cash U.S. butter set a record high in the Labor Day holiday shortened week, with one sale Friday soaring to $3.1825 per pound. It closed at $3.17, up 7 cents on the week, besting the Sept. 25, 2015, record by 3.50 cents, and is $1.3850 above that week a year ago. There were 17 sales reported on the week at the CME.

StoneX reminds us that the 2015 record lasted for just one day. Three days later the price had dropped by 51 cents, to $2.6250. That obviously didn’t happen this week but their warning remains; “Big prices can result in big price swings.”

Butter manufacturers tell Dairy Market News that most things at the operational level are unchanged despite the record high prices. Butter demand is steady. “Customers are hesitant, but markets have shown few signs of backsliding coming into the busiest butter season of the year.” Global values of butter are notably lower than domestic values but are starting to pivot upward as well. Questions remain as to large-scale end users looking at freight availability and cost differentials of bringing in butter from New Zealand.”

High temperatures in the west are lowering farm milk production and component content. Demand for cream is steady to lighter, as some Class II producers are running lighter schedules. Cream inventories remain tight, though some contacts reported increased availability this week. Butter churns are active. Some plant managers say limited tanker availability and labor shortages are preventing them from increasing output. Demand for butter is unchanged in retail and food service markets. Bulk sales are strong and inventories remain tight. Some contacts are limiting deliveries to customers to help fulfill near-term commitments.

The CME Cheddar blocks closed Friday at $1.9175 per pound, up 15.25 cents on the week, highest since July 27, and 12.75 cents above a year ago. The barrel’s Friday finish was at $1.9325, 0.75 cents higher on the week, 45.50 cents above a year ago, and just 1.50 cents above the blocks. Sales totaled 3 cars of each.

Midwestern cheesemakers reported “off-kilter buying” due to the price inversion as barrels hold a premium to the blocks. Most cheesemakers say business is steady or picking up. Some continue to be behind on orders and are limiting them. Milk availability at mid-week was somewhat different than other holiday shortened weeks, as spot milk discounts were not being offered, DMN said.

Western retail cheese demand was unchanged in domestic markets. Food service is trending higher, with increased mozzarella sales to pizza makers.

Domestically produced cheese is competitively priced for international markets, and contacts say this is contributing to strong demand. Cheese makers are running near capacity, though some plants reported lighter output due to continuing labor shortages and delayed deliveries of production supplies.

Grade A nonfat dry milk closed at $1.5750 per pound Friday, up 5.50 cents on the week and 21.75 cents above a year ago. There were 34 sales on the week.

Dry whey closed the week at 45.75 cents per pound, 0.75 cents lower and 7.25 cents below a year ago, with 9 sales reported on the week at the CME.

This week’s Global Dairy Trade auction reversed five consecutive drops in its weighted average, jumping 4.9 percent, highest gain since March 1, a period that saw 10 sessions of loss to only 3 gains. Traders brought 59.8 million pounds of product to market, down from 66.9 million on August 16. The average metric ton price climbed to $4,007 U.S. per metric ton, up from $3,768.00.

The ascent was led by anhydrous milkfat, up 13.9 pecent, after leading the declines last time with a 9.8 percent drop. Butter was up 3.3 percent, following a 0.2 percent gain. Whole milk powder was up 5.1 percent, after dropping 3.5 percent in the last GDT and its average was up $195 per metric ton from the last Pulse event. Skim milk powder was up 1.5 percent, after inching 0.1 percent higher. Cheddar was up 1.0 percent, following a 4.2 percent rise. Buttermilk powder was the only decline, down 5.1 percent. It did not trade in the last event.

StoneX Dairy Group says the GDT 80 percent butterfat butter price equates to $2.3760 per pound U.S., up 7.3 cents from the last event, and compares to CME butter which closed Friday at what is likely a world high $3.17 per pound. GDT Cheddar, at $2.2889, was up 1.9 cents, and compares to Friday’s CME block Cheddar at a bargain $1.9175. GDT skim milk powder averaged $1.6215 per pound, up from $1.5984, and whole milk powder averaged $1.6374 per pound, up from $1.55. CME Grade A nonfat closed Friday at $1.5750 per pound.

North Asia’s market share was “abysmal” in this event, reported StoneX, and the lowest value since March 2020, falling well below both the last event and year-ago levels, thanks primarily to China. SE Asia, Middle East, and Europe picked up purchases, bringing their market share levels higher than year-ago levels as well as the last event.

China has implemented yet another zero-COVID lockdown, this time in Chengdu, another of the country’s biggest cities, putting future dairy purchases in limbo.

Meanwhile, July U.S. dairy exports continued to impress. HighGround Dairy’s (HGD) Lucas Fuess reported details in the Sept. 12 Dairy Radio Now broadcast.

Butter exports saw the biggest gain, up 77.7 percent from July 2021. Volume only totaled 13.4 million pounds, small compared to domestic usage, Fuess said, but impressive nonetheless. The July total was the highest since March and the largest July shipments since 2013. Top destinations included Canada, Bahrain and South Korea. Butter exports are up 31.7 percent year to date.

July butter imports grew to a record 12 million pounds, up 51 percent from a year ago, with YTD up 10.9 percent, as the high U.S. price acts as a magnet for imports that may bring prices back down but those imports be needed to satisfy domestic demand.

Cheese exports totaled 82.2 million pounds, up 1.6 percent, but topped those of a year ago for the 13th consecutive month and the strongest July on record, HGD said.

Mexico remained the top destination and saw the largest year over year gain of any country, up 17 percent, with a 31 percent market share, according to HGD. South Korea was the second largest destination, followed by Japan. Cheese imports were down 14.1 percent from July 2021.

Dry whey exports were up for the second month in a row, totaling 43.3 million pounds, up 11.6 percent, though YTD they are down 13.9 percent.

To no one’s surprise, nonfat dry milk shipments were down, coming in at 142.8 million pounds, down 9.7 percent from last year’s impressive sum, according to Fuess, and was the weakest of any month since February. Mexico remained the top powder destination but showed the largest year over year decline, down 14 percent. Some of the loss was offset by gains to Southeast Asia, according to Fuess, including the Philippines and Indonesia.

Exports continue through the Cooperatives Working Together (CWT). Member cooperatives accepted four offers of export assistance this week that helped them capture sales of 3.2 million pounds of American-type cheese. The product is going to customers in Asia, Middle East-North Africa and Oceania, through February.