USDA bean counters reduced their 2015 and 2016 milk production estimate in the latest World Agricultural Supply and Demand Estimates report as "the dairy herd is expected to decline more rapidly from its second-quarter peak, and growth in milk per cow in 2015 remains slower than expected."

2015 production and marketings were forecast at 208.7 billion pounds and 207.7 billion pounds, respectively. Both are down 200 million pounds from last month’s report. If realized, 2015 production and marketings would be up 2.7 million pounds or 1.3 percent from 2014.

2016 production and marketings are projected at 212.9 and 212 billion pounds, respectively, both down 100 million pounds from last month. If realized, 2016 production and marketings would be up 4.2 million pounds or 2.0 percent from 2015.

Imports were reduced on both a fat and skim-solids basis for both years as imports of milk protein concentrates and casein are expected to be lower. Exports were reduced for 2015 on weaker butter, cheese and whey sales.

"Largely uncompetitive prices are likely to limit growth in export sales of butter and, to a lesser extent, cheese in 2016," USDA says, "and fat based exports were reduced. Strong domestic demand for butter is expected to support relatively high butter prices during the remainder of 2015, but supplies are expected to be large, and the price forecast for 2016 was lowered."

Cheese prices were lowered for 2015 and 2016 as supplies remain large. The nonfat dry milk (NDM) price was reduced for 2015 and 2016 as prices move closer to international levels. Whey prices were unchanged from last month.

Class III milk prices were lowered for 2015 and 2016 reflecting the lower 2015 cheese price forecasts. Look for the 2015 Class III price to average around $15.80 per cwt., down from the $15.95 projected a month ago and compares to the record $22.34 in 2014 and $17.99 in 2013. The 2016 average is now pegged at around $15.15, down a nickel from last month’s prediction.

The Class IV milk price was raised for 2015 due to the stronger forecast butter price, which more than offsets the lower NDM price. However, the 2016 Class IV price forecast was lowered as cheese and NDM forecasts were reduced.

The Class IV is expected to average $14.20 in 2015, up from $13.95 projected a month ago, and compares to $22.09 in 2014 and $19.05 in 2013. The 2016 Class IV average is put at $14.35, down a dime from last month’s expectation.

Checking Chicago, cash cheese prices dropped the second week of November, ending two weeks of gain, as traders speculate if the Nov. 17 Global Dairy Trade auction would continue to slide. CME block Cheddar closed Friday the 13th at $1.62 per pound, down 8 cents on the week and 32.25 cents below a year ago when the blocks tumbled almost 26 cents. The Cheddar barrels plunged 18.25 cents this week, lowest price since Sept. 23, 2015, 44.75 cents below a year ago when they lost 20.5 cents, and are a whopping 15.25 cents below the blocks. Six cars of block traded hands last week at the CME and 38 of barrel.

FC Stone broker Dave Kurzawski warned in his Nov. 9 Early Morning Update that "hefty supplies matched against only good, but not remarkable, domestic cheese demand in October gave way to a somewhat lower trajectory to spot pricing to end last month. From a historical perspective, if the price of cheese is falling, even modestly so, at the end of National Pizza Month, it stands to reason more price weakness could be in the cards for the balance of the year."

Dairy Market News (DMN) reports that Midwest cheese production is steady. Food service and pizza demand is robust. Many cheese makers are seeing natural cheese varieties leave their facilities without going into inventory. A new barrel cheese facility is scheduled to come online in southwest Wisconsin within the next month.

Western cheese production is active with milk readily available. Retail and food service demand for block cheese is strong. Cheese makers say they are not building inventories of these types. Demand for cheese barrels has also been relatively good, but some manufacturers mention inventories are long.