The downturn in U.S. milk production was bigger than we thought but is likely over. The Agriculture Department’s latest preliminary data put September output at 18.21 billion pounds, down a somewhat bullish 32 million pounds or 0.2 percent from September 2022. The top 24-state total, at 17.465 billion, was down 0.03 percent. It was the third consecutive month that output lagged a year ago as low milk prices and high feed costs took their toll.

The August 50-state total was revised down 119 million pounds from last month’s estimate, which put output down 0.8 percent from 2022 instead of the 0.2 percent originally reported. The 24-state revision was down 73 million pounds, down 0.7 percent, instead of the 0.3 percent loss originally reported.

The Oct. 19 Daily Dairy Report stated, “USDA made important revisions to data in prior months, suggesting that since April, milk supplies have been lighter than previously believed. USDA revised lower year-over-year production for each of the last five months by at least 0.1 percent,” the DDR said, “and revised cow numbers downward in July and August by 11,000 and 14,000 head, respectively.”

September cow numbers totaled 9.370 million head, down 6,000 from the August count, which was revised down 14,000 head. The herd is 36,000 below a year ago and the smallest since January 2022. The 24-state count was down 2,000 from August, which was revised up 1,000 head, but is 16,000 below a year ago.

Output per cow in the 50 states averaged 1,943 pounds, down 68 pounds from August, but 4 pounds or 0.2 percent above September 2022. The 24-state output averaged 1,960 pounds, down 70 pounds from August but 3 pounds or 0.15 percent above a year ago. Revisions lowered August output per cow by 10 pounds in the 50 states and lowered it 8 pounds in the 24 state data.

Culling continues to slow. The Livestock Slaughter report showed an estimated 240,500 dairy cows sent to slaughter under federal inspection in September, down 34,700 head from August, and 20,000 or 7.7 percent below September 2022.

The week ending Oct. 7 saw 57,100 dairy cows go to slaughter, up 500 from the previous week but 2,900 or 4.8 percent below a year ago. Year to date 2,435,200 head have been culled, up 93,900 or 4.0 percent from a year ago.

The Agriculture Department announced the November Federal order Class I base milk price at $19.75 per hundredweight, up 28 cents from October, $4.34 below November 2022, but the highest Class I since February. It equates to $1.70 per gallon, down from $2.07 a year ago. The 11- month average stands at $19.15, down from $23.76 a year ago, and compares to $16.61 in 2021.

“With the exception of spot fourth quarter, dairy margins were steady to slightly higher over the first half of October as strength in milk prices more than offset higher projected feed costs,” according to the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC.

“USDA lowered their yield forecast for both corn and soybeans in the October WASDE with the corn balance sheet tightening from September and both markets moving higher following the report with ideas we may have seen the harvest lows. Milk prices have stabilized recently as strength in dairy product prices, particularly butter, is helping to support the milk market.”

The MW reported on the record butter price, citing tight cream supplies this summer particularly in the West limiting butter production which combined with strong demand. It also cited data from the latest Dairy Products report and stated “Combined production of nonfat and skim milk powder declined 14.4 percent from a year ago, lowest August figure since 2016. Milk powder exports in August of 145.7 million pounds were up 5.5 percent from last year with YTD exports 0.5 percent ahead of 2022 and the second highest on record behind 2021. August cheese exports of 79.5 million pounds were down 3 percent from last year, with the YTD pace trailing 2022 by 5.7 percent,” the MW concluded.

CME block Cheddar climbed to $1.8125 per pound Thursday, highest since Sept. 19, but closed Friday at $1.7875, up 8.75 cents on the week, ending six weeks of losses but still 27 cents below a year ago.

The barrels finished at $1.71, 6.50 cents higher, highest since Sept. 18, 38 cents below a year ago, and 7.75 cents below the blocks. Twenty-nine loads of block were traded on the week and 15 of barrel.

Midwest cheesemakers reported mixed notes regarding demand, according to Dairy Market News. Some Cheddar and pizza style cheesemakers say orders are below average for this time of year. Others are as busy, if not busier. Cheese inventories have grown at some plants but not to a concerning level. One reason is the milk supply which is still in line with previous weeks. Reported spot prices ranged from 25 cents to $1.75 over Class III. Last year, they were $3 under to $1 over Class. Cheese production was slightly busier than the previous week but plants expect steadier interest as the block to barrel price gap narrows.

Cheese demand in the west is steady from retail and food service. Exports lag domestic demand, though sentiment is that that prices are currently more competitive to attract greater interest from international buyers. Demand for Class III milk is strong to steady, however some manufacturers report limited extra milk, making production schedules steady, says DMN.

Spot butter, after plunging 14.25 cents the previous week, fell to $3.35 per pound Monday, then jumped 6 cents Tuesday, only to close Friday at $3.36, unchanged on the week and 16 cents above a year ago, with 13 loads trading hands.

Cream has been somewhat tight until October, according to DMN, but butter makers said it opened up late last week and over the weekend. Cream spots are now in the low 1.20s, “within the fiscal comfort zone for churning.” Both Class II and Class III have shown slowdowns in cream end usage, therefore butter processors say that both regional and Western region cream loads are available.

Cream is tight in the West, but spot loads are available. Some butter producers are limiting purchases of cream due to current prices. Domestic demand for butter is reported as steady.

Grade A nonfat dry milk climbed to $1.2350 per pound Thursday but finished Friday at $1.2325, up 1.25 cents on the week, highest since Feb. 13, but still 18.75 cents below a year ago. There were 18 sales on the week. The reduced flow of cargo trucks at the U.S.-Mexico border in El Paso, Texas, has eased.

Dry whey closed Friday at 39.50 cents per pound, up 6 cents on the week, highest since April 5, though 4.50 cents below a year ago. 30 loads sold on the week.

The Oct. 17 Global Dairy Trade saw its fourth consecutive week of gain. Event 342’s weighted average rose 4.3 percent, following a 4.4 percent rise on Oct. 3. Traders brought 79.3 million pounds of product to the market, down from 84.5 million on Oct. 3, the lowest since Aug. 15. The average metric ton price climbed to $3,202 U.S., up from $3,104 on Oct. 19, and the highest since July 18.