USDA reports that disruptions in processing and consumption were noted in the Northeast the week of Oct. 31 as heavy snow caused branches and power lines to break, leaving many consumers without power for extended periods. Manufacturing in the region was heavier as a result. 

Milk intakes are near annual low levels in the Northeast, Upper Midwest, and Pacific Northwest. California intakes are both higher and lower and above year ago levels. Receipts are higher in Florida, Utah and Idaho. Bottlers were increasing production of eggnog as well as specialties for holiday consumption such as sour cream, dips, and whipping cream, reducing manufacturing milk supplies in those areas.

Cream interest was also improved from most non-ice cream
manufacturers as a result.

Looking “back to the futures,” the average for the first six months of 2012 stood at $16.63 on Nov. 4 and was right around $16.67 at our deadline on Nov. 11. California’s December Class I milk price is $20.67 per cwt. for the north and $20.94 for the south, up 41 cents and 40 cents respectively from November, but $2.39 above December 2010. The Northern price averaged $20.68 in 2011, up from $16.97 a year ago. The southern price averaged $20.95, up from $17.24 in 2010. The Federal order Class I base price is announced Nov. 18 by USDA. 

The Cooperatives Working Together program accepted 12 requests for export assistance this week from Dairy Farmers of America, Darigold, Foremost Farms and United Dairymen of Arizona to sell a total of 2.1 million pounds of cheese to customers in Asia and the Middle East. The product will be delivered through May 2012 and raises CWT 2011 cheese exports to 81 million pounds.

The Risk Management Agency announced that the next sales date for the Livestock Gross Margin program is November 18, 2011. Approximately $7 million in underwriting capacity was allocated to support LGM for Dairy Cattle for the November 18 sales period. This will bring the total to approximately $13.2 million for fiscal year 2012. Sales will begin no earlier than 4:30p.m. CST. For complete details, log on to http://future.aae.wisc.edu/lgm_dairy.html

Cash dairy markets were the center of attention the second week of November as only two dairy industry-watched USDA reports were released. 

The spot block cheese price closed Friday, Veteran’s Day, at $1.95 per pound, up 7 cents on the week, and 54 cents above a year ago when they lost 7 cents. 

Barrel closed at $1.98, up 6 on the week, and 61 cents above a year ago. Seven cars of block traded hands on the week and none of barrel. The NASS-surveyed U.S. average block price hit $1.7255, up 0.3 cent. Barrel averaged $1.7588, up 1.8 cents.

FC Stone’s Nov. 4 Dairy Insider reports that cheese market participants “continue to question whether current price levels are fundamentally supported.” Broker Yanna Zalukina said; “We are not hearing that a substantial amount of cheese is moving for the holidays.”  “And with Oceania cheddar prices 35 cents below CME spot prices, it doesn’t appear current price levels are sustainable.”

Analyst Jerry Dryer wrote in his Nov. 4 Dairy and Food Market Analyst; that “Much delayed (holiday) orders for items like Pepper Jack and Colby-Jack cheese have shifted milk from barrels to blocks. He quickly added that, “Most observers remain convinced that this is a short-term price phenomenon. Class III futures are also very skeptical of the cheese prices’ staying power.” He pointed out that his “limited survey of cheese heads” found estimates ranging from $1.35-$1.55 per pound when asked what the cheese price would be by late December.

Stewart Peterson dairy advisor, Matt Mattke said in Tuesday’s DairyLine broadcast that, “the seasonal potential that cheese prices will stay strong, bows well for November milk prices.” Seasonality and correcting for an oversold condition is affecting the market right now, according to Mattke.

“The one good thing that has happened this year that is a bit out of the norm is that we had cheese prices finish up about 9 cents for the month of October and that’s pretty rare,” Mattke said. “When you look back over the past 14 years, there’s only been four times prior to that where October has been an up month for cheese.” 

October is one of the more consistent weaker months for cash prices, he said. Moving on from there, he points out that cheese prices this time of the year tend to be, on average, the strongest weeks of the year and credits end user buying for Thanksgiving, Christmas, New Years and Super Bowl. 

Weekly cheese inventories have fallen seven out of the last 10 weeks, Mattke reported, to where they’re about 2 percent lower than where they were a year ago “so it’s falling inventory and seasonality that’s taken over the market.” 

The cash butter price fell to $1.74, down 9.25 cents on the week and 25 cents below a year ago when it had recaptured 11 cents after plunging 30.5 cents the week before. Eight cars were sold on the Veteran’s Day week. NASS butter averaged $1.8393, up a penny.

Holiday butter orders are also being filled but Jerry Dryer warns that “manufacturers are looking over their shoulders at expensive inventories and big production numbers.” Orders are good, he reports, and holiday promotions are building, but prices are well above a year-ago and “the big question is how much butter will actually cross the scanner at retail?”

He speculates that the CWT program may assist in exporting butter next year, but CWT’s own existence may be in question as to whether it has the required 70 percent participation of the nation’s milk supply. We may not have the answers until National Milk’s Nov. 14th annual meeting.

Bill Van Dam, of the Alliance of Western Milk Producers, cautioned in his member newsletter that the scary part of the butter equation is the falling value of anhydrous butter oil in Fonterra’s Global Dairy Auction. He warned that the butterfat corrected price works out to butter values of $1.21.

“However, domestic and export sales have for quite some time now been robust enough to clear an ever growing output of butter but as we repeatedly learn there is always a price adjustment necessary to keep the volumes moving. 

This appears to be the case with butter and we can expect a continuing seasonal downward adjustment in prices. Holiday sales could surprise us if special promotions provide a boost and can keep prices fairly high for now,” he said.

Butter prices in Europe and Oceania are slipping downward, Van Dam reports, but not at a very rapid rate. Inventories are higher than the past year but are not at a level that will be a burden on the market.

“It seems the butter market fundamentals are still OK but the proper clearing price will need to be found.”   

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.