Increases in milkfat limited the losses in the Oct. 16 Global Dairy Trade auction (GDT) where the weighted average of products offered slipped 0.3 percent, following the 1.9 percent descent Oct. 2 and 1.3 percent on Sept. 18, but it was the fifth consecutive decline. Sellers brought 92.5 million pounds to sell, down slightly from the last event.

 Gains were led by butter and anhydrous milkfat, same products that led the declines last time. Butter was up 2.4 percent, following a 5.9 percent plunge. Anhydrous milkfat was up 1.0 percent, after dipping 4.4 percent. Lactose rounded out the gains, up 1.5 percent, after inching up 0.6 percent last time.

The declines were led by Cheddar cheese, down 1.8 percent, after it was down 1.2 percent in the last event. Rennet casein was down 1.7 percent and whole milk powder was off 0.9 percent. Skim milk powder was virtually unchanged.

FC Stone equates the 80 percent butterfat butter price to $1.8204 per pound U.S. CME butter closed Friday at $2.26. GDT Cheddar cheese equated to $1.5440 per pound and compares to Friday’s CME block Cheddar at $1.4975. GDT skim milk powder averaged 89.66 cents per pound and whole milk powder averaged $1.2378. CME Grade A nonfat dry milk closed Friday at 87 1/4-cents per pound.

Cooperatives Working Together (CWT) members received eight offers of export assistance this week to help sell 1.448 million pounds of Cheddar cheese for delivery in Asia, the Middle East and North Africa from November through March.

CWT’s 2018 assisted sales total 49.72 million pounds of American-type cheeses, 12.96 million pounds of butter (82 percent milkfat) and 52.19 million pounds of whole milk powder to 36 countries on five continents.

The U.S. Trade Representative Robert Lighthizer notified Congress Wednesday that the Trump Administration intends to negotiate three separate trade agreements with Japan, the European Union and the United Kingdom.

The announcement drew praise from the International Dairy Foods Association (IDFA), stating that “Each of these countries offers abundant opportunities for increased U.S. dairy exports.” IDFA president and CEO Michael Dykes, also called for “greater market access levels for dairy in Japan, the UK and the EU.”

“Japan is U.S. dairy’s fourth-largest market, representing sales of more than $290 million last year. The UK currently imports $3.4 billion worth of dairy, but imports from the United States represent only 0.25 percent of that value.”

“The EU has the potential to be a large export market for the United States. In 2017, the EU exported nearly $1.5 billion in dairy products to the United States, but U.S. companies exported only $116 million in dairy products to the EU.”

“As we enter into these negotiations, it will be important for our negotiators to reduce existing tariff and nontariff barriers to U.S. exports in these key markets,” Dykes said.

CME spot cheese prices plunged ahead of Friday afternoon’s September Milk Production report and Monday’s Cold Storage report. The cheese was down for the third consecutive week and to the lowest levels since June 27, 2018.

 Midwestern cheese production is active, according to Dairy Market News. Spot milk prices are at a premium, from 50 cents to $2.00 over Class III, thus nonfat fortifying is reportedly at its peak. Cheese market tones are bearish. There were expectations of an amalgamation of barrel and block prices after last week’s record-breaking price gap but that has not been the case.

The USDA announced their Solicitation for Trade Mitigation Purchase of Process Cheese on Oct. 15. The announcements were for December to March delivery totaling about 6 million pounds of processed and 2 million of natural cheeses. There will be another round of announcements in January that will cover process and chunks, plus the first announcement on fluid milk purchases. The January announcements will be for April to June delivery and the purchases will be distributed to “various food nutrition assistance programs.”

FC Stone says “We don’t have definitive clarity yet on whether this is new spending or simply shifting ongoing purchases to the 2018 Trade Mitigation Program (it seems to be new spending), but that will have implications for how impactful this solicitation is for US cheese prices.”

Cash butter jumped 4 cents Monday, then roller-coastered to a Friday close at $2.26 per pound, up a penny on the week but 9 cents below a year ago. 42 carloads found new homes on the week at the CME.

DMN says cream remains tight for churning in the Central region but varies by plant. Plants able to locate financially feasible cream have churns running actively. Others are buying increasing amounts of bulk butter. Some have found Western loads at more favorable prices than within the region. Butter markets are mostly steady. This was the first week of the newly imposed kosher requirement on the CME cash spot market.

It’s not news to dairy producers how tough things are on the farm. FC Stone’s Dave Kurzawski wrote about it in his Oct. 16 Early Morning Update and talked about it in the Oct. 22 Dairy Radio Now broadcast.

“$16 milk is (generally speaking) a ‘good’ milk price, particularly given the industry’s intense focus on income over feed margins,” he said. “However, it’s becoming abundantly clear to us that ‘income over feed’ scenarios don’t tell the full story. To truly understand what dairy farmers are facing you must look at income over feed plus rising fixed costs.”

“Fixed costs have been, and continue to, rise for US dairy farmers for some time now,” he argued. “Labor costs, maintenance costs, energy, and costs to service debt are materially higher than this time last year.”

 “Yes, other US dairy businesses face the same challenges,” he concluded, “But dairy producers, by and large, are price takers. They can’t pass along those increased operational costs. This fact is putting more pressure on dairy farmers than would normally meet the eye with a simply income over feed analysis.”

“Milk per cow was 1,946 pounds in August (62.8 daily pounds per head), 1.4 percent above August 2017. Milk per cow typically declines seasonally from July to August, with an average decline of 1.2 percent for the 20 years from 1997 to 2017. This year, the decline from July to August was only 0.5 percent.”

 The Agriculture Department announced the November Federal order Class I base milk price at $15.52 per cwt., down 81 cents from October, 89 cents below November 2017, and equates to $1.33 per gallon, down from $1.40 in October.

  Whole milk sales totaled 1.3 billion pounds, up 1.4 percent from a year ago, up 1.8 percent year to date, and made up 32.5 percent of total fluid sales in the month and 31.9 percent for the year so far. Skim milk sales, at 304 million pounds, were down 10.9 percent from August 2017, down 9.7 percent year to date, and made up just 8.0 percent of total milk sales for the year so far.

Total packaged fluid milk sales in the eight month period climbed to just under 31 billion pounds, down 2.1 percent from the same period a year ago.

Conventional products year to date totaled 29.3 billion pounds, down 2.2 percent; organic products, at 1.7 billion pounds, were up 0.5 percent. Organic represented about 5.6 percent of total fluid milk sales January through August.

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.