The October Federal order Class III benchmark milk price was announced at $21.81 per hundredweight, up $1.99 from September, $3.98 above Oct. 2021, and the highest October Class III since 2014. The ten month average stands at $22.20, up from $16.86 a year ago, $17.89 in 2020, and $16.37 in 2019.

Late Friday morning’s Class III futures portended a November price at $20.69 and December at $20.19 per hundredweight.

The October Class IV price is $24.96, up 33 cents from September, $7.92 above a year ago, and the highest October Class IV ever. The ten month average is at $24.82, up from $15.44 a year ago, $13.52 in 2020, and $16.23 in 2019. 

Cash butter suffered a Halloween Day meltdown, plunging a ghostly 19.50 cents, first time below $3 per pound since Aug. 19. It plunged a whopping 24.50 cents Tuesday, largest single day fall since Dec. 10, 2015 when it lost 49 cents. Another 9 cents got whacked off Wednesday, with 15 loads being sold, and fell to $2.61 per pound, a low not seen since May 10. 

Buyers grabbed the falling knife Thursday and 3 sales took the price back up 5.75 cents. It added 10.50 cents Friday to close at $2.7725, down 36.75 cents on the week, lowest since May 17, but still 83.75 cents above a year ago, as traders anticipated the afternoon’s September Dairy Products report. Sales totaled 27 for the week and 58 for the month of October, down from 87 in September.

Butter makers continue to report “normal conditions,” according to Dairy Market News. Cream is readily available. Churning has picked up in recent weeks and demand is “steady to busy in the final pushes of the holiday ordering season.” 

Cream volumes continue to increase in the West. Demand for cream is steady for both Class II and butter production, though some churning is limited by labor shortages. Food service butter demand is steady but retail grocers have filled stocks in preparation for the holiday season and are reducing their butter orders. 

Block Cheddar, after falling almost a dime the previous week, closed the first Friday of November at $2.01 per pound, up 5 cents on the week and 42.50 cents above a year ago. It closed October 4 cents lower than it began the month.

The barrels, after plunging 16.50 cents the previous week, finished Friday at $1.9750, also up 5 cents on the week, 47.25 cents above a year ago, and 3.50 cents below the blocks. They closed October 26.75 cents weaker on the month.

Sales for Halloween Week totaled 3 cars of block, with 18 for the month of October, down from 21 in September. Barrel sales totaled 7 for the week and 43 for the month, up from 35 in September.

Grade A nonfat dry milk fell to $1.37 per pound Wednesday, lowest since Sept. 28, 2021, but rallied to a Friday close at $1.40, down 3 cents on the week, 17 cents below a year ago, and down 11.75 cents on the month. There were 8 cars sold on the week and 29 in October, down from 78 in September.

Dry whey finished Friday at 46.75 cents per pound, up 3.75 cents on the week but 19.25 cents below a year ago, and unchanged from Oct. 3. Sales totaled 3 for the week and 6 for the month of October, down from 18 in September.

Dairy farm profitability crept out of the red a little in September. The month’s milk feed price ratio inched higher, ending seven consecutive months of decline. The USDA’s latest Ag Prices report shows the September ratio at 1.74, up from 1.70 in August, and compares to 1.66 in Sept. 2021. 

The index is based on the current milk price in relationship to feed prices for a ration consisting of 51% corn, 8% soybeans and 41% alfalfa hay. In other words, one pound of milk would purchase 1.74 pounds of dairy feed of that blend.

The All Milk Price average crept up to $24.40 per hundredweight, up a dime from August, after dropping $1.40 the previous month, and is $6.10 above Sept. 2021. 

The “recovery” will be short-lived however as butter and cheese prices have fallen. October will be “decent,” says dairy economist Bill Brooks, of Stoneheart Consulting in Dearborn, Missouri. Speaking in the Nov. 7 Dairy Radio Now broadcast, Brooks warned that things will head south from there.

“September’s gain in the income over feed calculation broke a three-month run of declines,” says Brooks. “Income over feed costs were above the $8 per cwt. level needed for steady to increasing milk production for the twelfth month running.” 

“Feed costs were the highest ever for the month of September and the third highest all time. The All-Milk price stayed just outside of the top ten at the thirteenth highest recorded,” according to Brooks.

He adds; “Dairy producer profitability for 2022, milk income over feed costs (using Oct. 31 CME settling futures prices for milk, corn, and soybeans plus the Stoneheart forecast for alfalfa hay) are expected to be $11.77 per cwt., a loss of 11 cents per cwt. versus the previous month’s estimate. 2022 income over feed would be above the level needed to maintain or grow milk production and $3.98 per cwt above the 2021 level,” Brooks stated.

“Looking at 2023, milk income over feed costs (using October 31 CME settling futures prices for milk, corn, and soybeans plus the Stoneheart forecast for alfalfa hay) are expected to be $8.41 per cwt., a loss of 69 cents per cwt. versus last month’s estimate. 2023 income over feed would be above the level needed to maintain or grow milk production, but down $3.36 per cwt. from 2022’s estimate.”

He urges producers to look at all of their risk management opportunities, get signed up for the Dairy Margin Coverage program, and look for opportunities on the feed side to “get those costs locked in if you can.”

Meanwhile, the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC., says “Dairy margins deteriorated further over the second half of October on a continued decline in milk prices while feed input costs held steady.”

The MW warned; “Both corn and soybean meal prices held steady over the past two weeks but are showing renewed strength on news that Russia will be pulling out of the Black Sea grain deal.”

The Dairy and Food Market Analyst reports European dairy prices remain under pressure. European 82%-fat butter sold for around $2.62 per pound, the last week of October, down 28 cents, and Cheddar cheese changed hands for between $2.33 and $2.40, down 7 cents. Dry whey traded around 41 cents the previous week, down 2 cents, and skim milk powder around $1.35 per pound, down 13 cents.

The Analyst adds that “Milk production in Europe is showing sustained growth.” “Output is above prior-year levels in each of the big-three milk producing regions of Germany, France, and the United Kingdom, up 1.1%, according to latest weekly data.” Looking down under, New Zealand September output was down 3.8%, which followed a 4.9% decrease in August, according to the Analyst.

The export market remained a huge factor of support, according to September data. Dry whey exports totaled 49.7 million pounds, up 22.4% from Sept. 2021. Growth into China was the largest for whey product and lactose, according to HighGround Dairy, with dry whey exports the strongest since March 2021.

 The Nov. 3 Daily Dairy Report stated; “Compared to the already strong trade reported a year ago, aggregate U.S. dairy exports were up 20.3% in value and 7.7% in volume,” and suggested that “Foreign buyers likely booked most of the September business earlier this year, when the dollar was weaker and U.S. cheese and butter prices were lower than they are today.” The DDR warned that “recovery in European milk output and waning global demand could stiffen competition for marketshare in 2023.”

Down on the farm, culling in the week ending Oct. 22, totaled 60,900 dairy cows, up 1,500 from the previous week and 100 head or 0.2% above a year ago.

“Slaughter of dairy cows staying strong continues to limit the ability of growth in the dairy herd,” says StoneX, “which will impact how fast milk volume in the US will be able to expand from current levels.” 

In politics; Green Bay-based Edge Dairy Farmer Cooperative reported on a Mid-October industry-wide effort to “build consensus on milk pricing reforms.”

The American Farm Bureau Federation (AFBF) hosted farmers and industry groups in Kansas City to “discuss meaningful changes to the U.S. dairy pricing system,” according to an Edge press release. 

Tim Trotter, Edge CEO, stated; “Edge is grateful for the opportunity to join other dairy groups in this collaborative forum to share ideas on the future of our milk pricing system. Discussion highlighted an interest in collaboration and laid a strong foundation for the dairy community to move towards the expectation of consensus laid forth by Agriculture Secretary Tom Vilsack.” 

“Edge is committed to building a more transparent pricing system that allows dairy farmers and their processor-partners to thrive. It is with meaningful and comprehensive reform that we can accomplish these goals and forge stronger farmer-processor relationships, built upon a foundation of trust and transparency,” according to Trotter.