Preliminary September data showed milk output up 1.5 percent from 2021. The September Dairy Products report indicates the extra milk went primarily to cheese, mainly Italian and Mozzarella.

Cheese output totaled 1.139 billion pounds, down 1.0 percent from August but was only up 0.4 percent from September 2021. Output year to date (YTD) hit 10.4 billion pounds, up 1.7 percent from a year ago.

Italian cheese totaled 498.1 million pounds, up 0.5 percent from August and 3.2 percent above a year ago. American cheese totaled 422.7 million pounds, down 2.3 percent from August and 2.6 percent below a year ago. Mozzarella output amounted to 384.7 million pounds, up 4.0 percent from a year ago, indicating strong pizza consumption.

Cheddar production fell to 304.7 million pounds, down 9.7 million pounds or 3.1 percent from August, and 5.2 million pounds or 1.7 percent below September 2021. YTD Cheddar is at 2.9 billion, down 1.7 percent from a year ago.

Butter output slipped to 141.6 million pounds, down 1.8 million pounds or 1.3 percent from August, and down 2 million pounds or 1.4 percent below a year ago. YTD butter output stands at 1.54 billion pounds, down 2.2 percent from a year ago.

Yogurt totaled 391.5 million pounds, down 4.5 percent from a year ago. Dry whey production climbed to 79 million pounds, up 700,000 pounds or 0.9 percent from August, and 3.8 million or 5.1 percent above a year ago. YTD is at 724.0 million pounds, up 2.4 percent.

Nonfat dry milk output fell to 123.7 million pounds, down 10.4 million pounds or 7.8 percent from August and was down 15.7 million or 11.3 percent below a year ago. YTD powder was at 1.5 billion pounds, down 3.9 percent.

Skim milk powder output climbed to 58.5 million pounds, up 2.5 million or 4.4 percent from August, but down 13.6 million or 18.9 percent from a year ago. YTD SMP was at 390.7 million pounds, down 23.7 percent from 2021.

Production of cheese, butter, nonfat and skim milk powder was weaker than forecast, according to StoneX. “With milk production coming in higher than expected, the thought was that dairy product production would also come in higher but that wasn’t the case.” They add that “Missing fat is up 24.1 percent from last year while missing protein is up 63 percent.” Where did it go?

The USDA’s milk production forecast for 2022 was raised in the Nov. 9 World Agricultural Supply and Demand Estimates report (WASDE), while the 2023 estimate was unchanged. The dairy cow inventory for both years was lowered on recent published data but forecast output per cow was raised.

2022 production and marketings were estimated at 227.0 and 225.9 billion pounds respectively, up 100 million pounds on both from last month’s estimates. If realized, 2022 production and marketings would still only be up 700 million pounds or 0.31 percent from 2021.

2023 production and marketings were estimated at 229.2 and 228.1 billion pounds respectively, unchanged on production from a month ago but down 100 million on marketings. If realized, 2023 production would be up 2.2 billion pounds or 1.0 percent from 2022, and marketings would be up 2.2 billion or 1.0 percent.

Cheese was projected to average $2.10 per pound in 2022, down a half-cent from a month ago, and compares to $1.6755 in 2021 and $1.9236 in 2020. The 2023 average was projected at $1.97, down 1.50 cents from a month ago.

The 2022 butter price average was estimated at $2.8450 per pound, down 3.50 cents from a month ago, and compares to $1.7325 in 2021 and $1.5808 in 2020. The 2023 average was projected at $2.4550, up 1.50 cents from a month ago.

Nonfat dry milk will average $1.68 in 2022, down a penny from last month’s estimate, and compares to $1.2693 in 2021 and $1.0417 in 2020. The 2023 average was estimated at $1.4050, down 9 cents from a month ago.

Dry whey for 2022 was unchanged at 60.50 cents per pound and the 2023 average was left unchanged at 48.50 cents per pound.

The 2022 Class III milk price was projected to average $21.80, down a dime from last month’s estimate, and compares to $17.08 in 2021 and $18.16 in 2020. The 2023 projection was lowered 15 cents to $19.65 per cwt.

The 2022 Class IV average was estimated at $24.30, down 30 cents from a month ago, and compares to $16.09 in 2021 and $13.49 in 2020. The 2023 average is estimated at $20.35, down 65 cents from last month’s estimate.

The USDA issued a pre-solicitation announcement Tuesday to purchase a variety of protein items to “support activities feeding kids and families.” Potential materials may include dairy, meat and poultry items. Nearly $1 billion will purchase food for emergency food providers like food banks.

Solicitations will be issued soon, according to USDA. StoneX speculates USDA will purchase 3 to 4 million pounds of cheese per month, “a drop in the bucket.”

The Global Dairy Trade’s Pulse auction on Tuesday saw 2.2 million pounds of Fonterra whole milk powder sold, same as the last Pulse, and at $3,225 per metric ton. That’s down $25 or 0.8 percent from last week’s Fonterra C2 whole milk price at the main GDT, according to HighGround Dairy, and the lowest WMP settlement since the December 15, 2020, event. Word Friday was that China may be pulling back from its zero-COVID policy. That could add strength to the GDT.

Global markets are increasingly important to U.S. dairy farmers and global markets “have never been more interdependent than they are currently,” said Ron O’Brien, president of New Zealand-based Nui Markets North America, in the Nov. 14 Dairy Radio Now broadcast. He said they’re not only dependent on dairy supply and demand in Europe and Asia or what’s happening on the GDT, NZX, or European indexes for dairy, but says they’re also dependent on market forces such as interest rates, currency rates, energy availability, and water availability.

O’Brien said he previously traded for one of the world’s largest dairy trading firms the last decade and “we arbitraged those markets. Trading firms will take advantage of the ebbs and flows, but what if you’re not an international trading firm but a U.S. producer or end user? Knowing volatility is a certainty and margins are tight, if not nonexistent, what can be done to minimize risk?”

O’Brien said he is digitalizing the physical dairy trading market because end users and processors need transparency and better data. He cited a few examples of such platforms so farmers, end users, and processors can have “better information and with better information, will have the ability to make better decisions, and with better decisions make better results.”

The CME Cheddar blocks finished Friday at $2.20 per pound, up 19 cents on the week, highest since June 15, and 45 cents above a year ago.

The barrels closed 8.75 cents higher at $2.0625, highest since Oct. 21, and 56.50 cents above a year ago. Sales totaled 5 cars of block on the week at the CME and 12 of barrel.

Retailers came closer to fulfilling holiday demand pipelines this week, says Dairy Market News, so more cheesemakers reported a slowdown in orders.