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10-month average Class III milk price up from year ago
 
Mielke Market Weekly
By Lee Mielke
 
 The October Federal order Class III milk price headed lower. The USDA announced the benchmark price at $22.85 per hundredweight, down 49 cents from September but is $6.01 above October 2023. That put the 10-month average at $18.82, up from $17.10 a year ago, but compares to $22.20 in 2022.
Wednesday’s Class III futures portended a November Class III of $20.27; December, $19.67; and January 2025 at $19.66 per cwt.
The October Class IV price is $20.90, down $1.39 from September, 59 cents below a year ago, and the lowest Class IV in five months. Its average stands at $20.71, up from $18.93 a year ago, and compares to $24.82 in 2022.
Butter and cheese stocks fell in September. The USDA’s latest Cold Storage report had Sept. 30 butter holdings at just under 303 million pounds, down 21.4 million or 6.6 percent from the August count, which was revised up 1.1 million pounds, but they were up 36.4 million pounds or 13.6 percent from September 2023.
HighGround Dairy points out that this month’s data is the eighth consecutive year over year gain in butter inventories and the largest since May 2023.
American type cheese stocks slipped to 782.8 million pounds, down 10.8 million or 1.4 percent from the August level, which was revised 6.3 million pounds lower, and were down 68.4 million pounds or 8.0 percent from a year ago.
The “other” cheese category, at 570.4 million pounds, was down 7.2 million pounds or 1.2 percent from the August count, which was revised 300,000 pounds lower, and was down 40.2 million pounds or 6.6 percent from a year ago.
The total Sept. 30 cheese inventory slipped to 1.38 billion pounds, down 18.3 million or 1.3 percent from August, and 108.2 million pounds or 7.3 percent below a year ago.
The Oct. 25 “Daily Dairy Report” points out that cheese inventories have declined for seven consecutive months and September’s drop “represents the largest year-over-year decline since mid-2014 and implies demand has outpaced supply.” Domestic demand has been lackluster, according to the DDR, but “Exports have soared to record-high levels this year and are playing a critical role in keeping cheese inventories in check.”
New avian flu cases are being reported in California, and Utah has joined the list of states dealing with it. StoneX says “The larger sentiment seems concerned about demand as seasonal demand tends to decline heading into year-end.”
Cash Cheddar block cheese was trading Thursday morning at $1.84 per pound, after closing Friday at $1.90. The barrels, after closing Friday at $1.3750, climbed to $1.9250 Wednesday, then fell back to $1.86 Thursday.
Cheesemakers had mixed viewpoints on demand this week, according to Dairy Market News. Some Cheddar and/or Italian style cheesemakers said customers were adding to orders, in fact a few were perhaps oversold. Others said the bullish push over $2 per pound created hesitation, despite prices settling back since then. Barrel contacts say loads are moving briskly. Cheese inventories are balanced to tight. Milk availability mid-week was slightly tighter than previous weeks, with spot prices ranged from 50 cents to $1.50 over Class III.
Western cheesemakers have a healthy demand for milk however, milk is tighter in the southwest as production is trending down. Milk is ample. Domestic cheese demand is generally steady for most varieties, with Swiss demand being stronger compared to a year ago. International demand is steady to stronger, with bookings for first quarter 2025 taking place, according to DMN.
Butter saw some ups and downs this week was at $2.7075 per pound Thursday after closing Friday at $2.6950.
Butter makers say demand is on par with recent weeks. “Prices settling in the $2.60 to $2.70 range has given some incentive to re-enter the market,” says DMN, though food service demand has been sluggish, particularly in the national chain sector. Butter production is busy, despite some plant downtime. Cream availability is wide open and offers are abundant. The bulls point to “The potential of a strong seasonal retail push,” while the bears suggest “The seasonally atypical amounts of cream availability and food service sluggishness will keep downward pressure on near- and mid-term pricing.”
Butter production is generally strong in the West. Cream volumes are widely available. Some are being bought and delivered to more eastern regions. Planned downtime is approaching for some and is contributing to busy production. Demand from domestic and international buyers is steady.
Grade A nonfat dry milk closed Thursday at $1.3775 per pound, after finishing Friday at $1.3750.
Dry whey was holding at Friday’s close of 60.50 cents per pound, as of Thursday morning.
The Oct. 30 Daily Dairy Report says “Beef prices have soared to record-highs, and this dynamic will have a fundamental impact on the dairy industry for years.”
The DDR adds “High beef prices have been underpinned by a shrinking national beef herd. As producers and ranchers faced persistent drought conditions and rising operating costs in recent years, many responded by reducing the size of their herd. As a result, the national herd is the smallest it has been in 73 years.”
Herd recovery will take years, says the DDR. “The higher prices have benefited dairy farmers who have bred at least a portion of their herd to beef bulls, resulting in a crossbred calf that can fetch a hefty price when sold to a feedlot.”
That has limited the number of dairy replacement heifers and will likely keep a lid on dairy expansion and thus U.S. milk production. Rabo Bank’s Lucas Fuess says the situation is unlike any before in the Nov. 4 Dairy Radio Now broadcast.
Milk production did turn positive in September, he said, and with the improved margins dairy farmers are seeing, Rabo Bank expects output to at least be flat or moving higher than a year ago the rest of fourth quarter and into 2025.
He quickly added, “Even if dairy farmers did want to expand their herd and grow cow numbers at a pretty quick rate to take advantage of those profits that have emerged, the cow situation is a little different than normal.”
High prices for day-old calves and for springer replacements is causing farmers to do some financial calculations and he believes it will prevent a quick resurgence in cow numbers and recovery in milk production, thus keeping milk prices relatively high.
In other news of interest: StoneX reported in its Oct. 30 “Early Morning Update” that the European Commission will impose countervailing duties on imports of electric vehicles from China. “It seems likely that China will retaliate by confirming tariffs on EU agricultural imports under investigation (pork, in addition to cheese and cream). Earlier this month, the Ministry of Commerce decided to collect provisional anti-dumping duties on brandy in the form of security deposits.”
“Only 18 percent of China’s cheese imports come from EU,” according to StoneX. “Some of that is high end specialty product that they aren’t going to buy from the U.S., but it probably increases our ability to compete on mozzarella. From a longer-term perspective, the Chinese government is trying to encourage the Chinese industry to build cheese capacity,” says StoneX.
Tuesday’s Global Dairy Trade Pulse saw 4.8 million pounds of product sold, up from 4.7 million in the last Pulse.
11/4/2024