Chicago Mercantile Exchange barrel Cheddar cheese set a new record high price recently, hitting $2.6225 per pound, eclipsing the previous $2.53 record on Nov. 2, 2020.

Midwest cheesemakers are beginning to shift to retail holiday basket and packages, according to Dairy Market News. Production has been somewhat inconsistent for the third consecutive week as multiple plants have been running lighter schedules due to maintenance and/or plant updates. Barrel processors have only recently begun to be able to offer loads to customers and some say this is the first instance of extra barrels being available since the early weeks of summer, which helps explain the record price. Milk availability is improved but only due to the plant downtime. Spot milk prices mid-week were above Class III but the wide price gap between barrels and blocks is viewed as an indicator of potential market instability, says DMN.

Milk demand from western cheese manufactures is strong to steady. However, spot milk availability varied. Bottling demand and milk production dips have contributed to tighter availability. Cheese production is strong or steady. Stocks are accommodating obligations and spot demand however, inventories are reportedly tight, barrels especially. Domestic demand is steady to lighter. Export demand is more mixed, according to DMN.

Butter fell below the $3 mark Thursday for the first time since May 29, closing at $2.97 per pound.

Central butter production is busier than seasonally expected. Cream availability remains ample within the region and from Western sources, as school bottling spin-off and fat components continue to trend higher at the farm. Some butter makers have said the last two weeks of regular churning schedules were not expected to last as long as they have, but now, some expect cream availability to last at least into next week. Butter demand is picking up the holiday pace. Customers are adding to orders to prep for the holiday push, says DMN.

July’s Supply and Utilization data tells a behind the scenes story. While cheese prices saw great strength, the strength was due more to supply than demand, according to HighGround Dairy economist Betty Berning. 

Speaking in the Sept. 23 “Dairy Radio Now” broadcast, Berning said American cheese utilization has been down every month of 2024, Cheddar vats have put out less product, and the tight milk supply isn’t helping matters.  She added however that fast food chain offerings have been strong and, “When you think about what goes on a cheeseburger, its processed cheese made with barrel cheese.”

Total domestic cheese utilization was up 0.8%, but off 0.4% year to date. Exports totaled 88.7 million pounds, up 9.6% from July 2023 and up 22.1% year to date. 

“For the first time in 2024, both domestic utilization and commercial butter exports marked growth above the prior year,” according to Berning. Domestic use was up 5.5% and exports were up 15.4%. The CME price has slipped, she admitted, but is still historically high.

Nonfat-skim milk powder utilization was down 19.2%, lowest since 2014, according to HGD. Domestic use was down 70% and year to date down 41.1%. Exports were up 10.8% in July but down 8.5% year to date. HGD attributes the higher CME prices to nervousness about milk supply.

Dry whey usage was down 28.6% domestically, while exports were up. HGD points out that dry whey production sharply declined between May and July due to manufacturing issues and says “Limited supplies are behind the price rally above 50 cents per pound on the CME rather than hearty demand.”

Income over feed costs, while not an exact science, are headed to levels that are historically high, Berning concluded. “There’s great opportunities for producers to lock in margins into next year and insure they can maintain profits, pay down debt, invest in operations, feed a higher quality ration, or do whatever is needed to take advantage of these very good milk prices.”

Fluid milk sales were up in July after dipping 2.9% in June. The USDA’s latest data shows packaged sales at 3.4 billion pounds, up 4.3% from July 2023. 

Conventional product sales totaled 3.1 billion pounds, up 3.7% from a year ago. Organic products, at 257 million pounds, were up 11.7%, and represented 7.6% of total sales for the month.

Whole milk sales totaled 1.3 billion pounds, up 4.7% from a year ago, up 2.5% year to date, and represented 37.9% of total sales for the month of July.

Skim milk sales, at 146 million pounds, were down 8.7% from a year ago and down 12.3% YTD.

Packaged fluid sales in the seven months totaled 24.7 billion pounds, up 1.1% from 2023. Conventional product sales totaled just under 23 billion pounds, up 0.7% from a year ago. Organic products, at 1.8 billion pounds, were up 6.8%, and represented 7.1% of total milk sales in the seven months. 

The figures represent consumption in Federal market orders, which account for about 92% of total fluid sales in the U.S.

The October Federal order Class I base milk price was announced by the USDA at $23.17 per hundredweight, up $1.57 from September, $3.70 above October 2023, and the highest Class I price since Nov. 2022. It equates to $1.99 per gallon, up from $1.67 a year ago. The 10 month Class I average stands at $20.02, up from $19.09 a year ago, and compares to $23.73 in 2022.

Dairy margins were flat to slightly higher over the first half of September as milk prices continued to advance while feed costs were steady to slightly higher, according to the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC. 

“Spot milk availability continues to be limited for processors who are paying premiums of up to $4 per cwt. over Class prices, the highest spot price for milk in mid-September since 2010,” the MW stated. “Dairy product prices continue to be supported at lofty levels, helping to drive strength in Class 3 and Class 4 Milk.” 

“Butter prices have maintained at $3.00 per pound or higher in spot CME trade since late May, with European prices exceeding $4.00 due to the fallout from bluetongue disease. Cheese prices are likewise firm.”

Exports to Mexico through the first six months of the year were nearly 250 million pounds, up 39% from 2023. Exports to Mexico have set new monthly records now for 14 consecutive months.”

“Exports of other dairy products have likewise been impressive. July whey exports were up 22.4% year-over-year, led by a 34% increase in shipments to China. 

U.S. exports of nonfat dry milk hit a 14-month high in July and outpaced July 2023 by 10% with shipments to Mexico setting a record for the month, up 20% from a year ago,” the MW concluded.

The latest Livestock Slaughter report showed an estimated 231,300 head of dairy cows were slaughtered under federal inspection in August, up 5,400 from July, but 43,900 head or 16% below August 2023. 

The Agriculture Department’s monthly Livestock, Dairy, and Poultry Outlook, issued Sept. 18, mirrored milk price and production projections in the Sept. 12 World Agricultural Supply and Demand Estimates report.

The Outlook stated “Despite some fluctuations, dairy product consumer price indexes (CPIs) have generally risen in 2024, contrasting with the broader decline in overall product and food CPIs. The recent decline in the food service sector, particularly restaurants, may be also underlying the decline in the domestic consumption of dairy products. The National Restaurant Association’s Restaurant Performance Index has been consistently lower in 2024 compared to the previous year, suggesting that restaurants are facing challenges such as reduced consumer spending, rising costs, and shifts in consumer preferences, all likely impacting demand for dairy products from the foodservice sector.”

Improved margins are likely to create incentives for farmers to increase their herds in 2025, according to the Outlook, however, the tight supply of heifers will moderate growth in the first half of the year. The forecast for the 2025 dairy herd was unchanged at 9.360 million. With lower 2024 forecasts for milk per cow and expected steady increases in milk solids components, the 2025 forecast for yield per cow was lowered 30 pounds to 24,345 pounds. U.S. milk output is projected at 227.9 billion pounds, 300 million pounds lower than last month’s forecast.

Analyst Dustin Winston says “North Asian purchases fell from last year’s levels but still made up more than half of the purchase volume in this GDT. Skim milk powder continues to be a large factor in their purchase volume. The Middle East and North America were the only regions to increase their purchase volume from both last year and last event.”