U.S. butter stocks still remain well below a year ago, according to the Agriculture Department’s latest Cold Storage report. Sept. 30 butter dipped to 267.3 million pounds, down 11 million pounds or just under 4 percent from the August total, which was revised down 4.3 million pounds, and down 57.1 million or 17.6 percent below a year ago, the 14th consecutive month stocks were below the previous year. It’s also the lowest inventory since 2017, according to the Daily Dairy Report.

American type cheese stocks inched up to 843 million pounds, up 1.5 million pounds or 0.2 percent from August, but down 1.1 million or 0.1 percent from a year ago.

The “other” cheese category fell to 603.5 million pounds, down 15.3 million or 2.5 percent from the August level, which was revised 1.5 million pounds lower, but was up 11.6 million pounds or 2.0 percent above a year ago.

The total cheese inventory slipped to 1.47 billion pounds, lowest since March, down 11.9 million pounds or 0.8 percent from August, but only 11.7 million or 0.8 percent above a year ago, still a September record, according to the DDR. StoneX called the report neutral to slightly bullish for cheese and bearish on butter.

The Global Dairy Trade held its seventh Pulse auction Tuesday, with another 2.2 million pounds of Fonterra whole milk powder being sold, unchanged from the last Pulse, but at $3,280 per metric ton. That’s down $145 or 4.2 percent from the Oct. 11 Pulse and down $75 or 2.2 percent from the Oct.18 GDT.

HighGround Dairy says this is the lowest since Event 275 on Jan. 5, 2021, “indicating further weakness into next week’s main Global Dairy Trade event.”

Meanwhile, StoneX Dustin Winston reports, “New Zealand milk solids production was weaker than expected once again, down 3.8 percent from year-ago levels in September. With the first third of the season completed, season-to-date production is down 4.0 percent from last year.” He says the decline wasn’t unexpected as weather hasn’t been good. Fat and protein levels were also weaker.

On the other hand, New Zealand September and third quarter exports were the strongest on record, according to HighGround Dairy, thanks to volumes moving to China and Indonesia. “Notable growth was also observed to Cuba, Saudi Arabia and Japan,” says HGD, “as prices have consolidated on GDT auctions the last five months. Gains to China were not in the form of milk powders, however. Larger exports to the region were led by fluid milk and cream, says HGD.

China’s dairy imports in September were up 0.7 percent from September 2021, first time in six months they managed to be above year ago. Unfortunately, skim milk powder imports only totaled 55.3 million pounds, down 17.9 percent from a year ago, seventh month in a row to be below the previous year, according to HGD. Australia was the largest source country at 21 percent, with New Zealand right behind.

Whole milk powder imports, at 66.3 million, were down 16.2 percent, though whey imports, at 138 million pounds, were up 11.3 percent, up for the second month in a row. The U.S. remained the top whey supplier, at 38 percent, according to HGD.

Cheese imports amounted to 22.8 million pounds, up 6.5 percent, following three months of weakness. Year to date imports however are down 17.6 percent. New Zealand was the primary supplier. Butter totaled 13.8 million pounds, up 46.9 percent, though YTD are down 0.2 percent.

In other trade news, the Oct. 26 Daily Dairy Report says another dairy deficit country, “Algeria, has become the world’s second largest importer of milk powders. A recent USDA Global Agricultural Information Network (GAIN) report shows Algeria’s milk equivalent consumption is estimated at about 4.5 million metric tons (MMT) per year, while production is just 2.5 MMT.”

The DDR says “Algeria imported 358,507 metric tons of milk powders last year. Whole milk powder accounted for 61.5 percent of those imports, with the vast majority sourced from South America. New Zealand also contributed to the total.

“Skim milk powder was sourced mostly from the European Union, while Turkey and the U.S. also sent meaningful volumes to the north African country,” according to the DDR.

Most cash dairy prices in Chicago were weaker the last week of October. The Cheddar blocks closed Oct. 28 at $1.96 per pound, down 9.75 cents on the week, lowest CME price since Sept.12. Wednesday was the first time in four weeks they were below $2 per pound, but are still 28.50 cents above a year ago.

The barrels finished at $1.9250, 16.50 cents lower on the week but 10.50cents above a year ago, and a typical 3.50 cents below the blocks. Sales totaled four cars of block for the week at the CME and three of barrel.

Cheese market tones are under pressure, according to Dairy Market News. Midwestern retail Cheddar and Italian style cheesemakers report continued strong demand and some are not even accepting new orders or new customers, because any available cheese they have is spoken for through the rest of the year. Processed cheesemakers, however, report that buyers are stepping back to avoid any extra inventory in the final quarter of the year. Milk is not as long regionally and spot milk prices are still slightly under to slightly over Class III. Cheesemakers and customers are working through 2023 contracting, says DMN, and “increases in costs, particularly of freight and payrolls, have become an added stress for both buyers and sellers.”

Retail cheese demand in the west is declining and below some expectations. The decline is, reportedly, due to higher grocery prices which are causing customers to modify purchases. Food service demand was unchanged this week. Export demand remains strong with continued interest from Asian buyers securing loads for second quarter. Cheese production is steady, though some plants report labor shortages and continued delayed deliveries of production supplies are preventing them from running full schedules. Block prices topped the barrels on Oct. 25, first time since early August. Contacts say recent increases in barrel production and spot availability contributed to the barrel price decline, says DMN.

Spot butter saw its Friday finish at $3.14 per pound, down 6 cents on the week, lowest since Sept. 26 but still $1.20 above a year ago, with 11 sales on the week.

Butter plants report that demand has remained seasonally strong despite the near-record prices. Some expect it to continue, but as cream availability and churning rates increase, producers are aware of the potential for butter inventory growth near-term. Cream prices were holding a steady pattern.