Cheese inventories remain steady

The October federal order Class III benchmark milk price was announced at $21.81 per hundredweight, up $1.99 from September, $3.98 above October 2021 and the highest October Class III since 2014. The 10-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.
 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 10-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 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 was 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 three 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 three cars of block, with 18 for the month of October, down from 21 in September. Barrel sales totaled seven for the week and 43 for the month, up from 35 in September.
  Dairy Market News said central cheese market tones were under some of the same bearish pressure that have impacted all dairy commodities in recent weeks. Contacts say there are two potential silver linings: lower prices prompting more sales and a closure of the block/barrel price spread. Most cheese processors have been reporting somewhat strong sales. Milk availability is slightly tighter, and offers were quiet this week. But, Class III producers are actively seeking milk. Cheese inventories are generally balanced.
  Demand for cheese in the West is steady in food service markets, though retail demand is softening and below some previously forecasted levels. Export demand is strong as domestically produced loads are being sold at a discount to international suppliers. Cheese prices started heading south the week of Oct. 24 but saw some recovery Halloween week. Some attributed the lower prices to increased spot availability for both barrels and blocks in recent weeks. Milk is available for cheesemakers to run steady schedules, said DMN, though some continue to battle labor shortages and delayed deliveries of production supplies.
 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 eight 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 three for the week and six 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 U.S. Department of Agriculture’s latest ag prices report shows the September ratio at 1.74, up from 1.70 in August, and compares to 1.66 in September 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, 1 pound of milk would purchase 1.74 pounds of dairy feed of that blend.
 The all milk price average crept up to $24.40, up a dime from August after dropping $1.40 the previous month and is $6.10 above September 2021.
 California’s all milk price fell to $25.10, down a dime from August but $7.10 above a year ago. Wisconsin’s, at $22.10, was unchanged from August but $3.70 above a year ago.
 The September national average corn price was $7.09 per bushel, down 15 cents from August but is $1.62 per bushel above September 2021.
 Soybeans fell to $14.10 per bushel, down $1.20 from August, after falling 20 cents last month but are still $1.90 per bushel above September 2021.
 Alfalfa hay gained $2, averaging $277 per ton, a record high, and $63 per ton above a year ago.
 The cull price for beef and dairy combined averaged $91.20 per cwt, up $1.10 from August, $18.30 above September 2021 and $19.60 above the 2011 base.
 The recovery will be short-lived, however, as butter and cheese prices have fallen. October will be decent, said 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, said Brooks. Income over feed costs were above the $8 per cwt level needed for steady to increasing milk production for the 12th 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 10 at the 13th highest recorded, according to Brooks.
 Brooks said 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 said.
 Looking at 2023, 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 $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 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.
 Speaking of feed, the U.S. corn harvest was 76% completed, according to USDA’s latest Crop Progress report, as of the week ending Oct. 30. That’s up from 61% the previous week, 3% ahead of a year ago and 12% ahead of the five-year average. The soybean harvest was at 88%, up from 80% the previous week, 10% ahead of a year ago and 10% ahead of the five-year average.
 International dairy markets remain weak. The Nov. 1 Global Dairy Trade weighted average dropped 3.9%, following the 4.6% decline Oct. 18, and 3.5% Oct. 4. Traders brought 63.6 million pounds of product to market, down from 64.8 million Oct. 18. The average metric ton price fell to $3,537, down from $3,723 last time and the lowest average since Jan. 5, 2021.
 Powders led the declines, starting with buttermilk powder down 11.4%. Skim milk powder was down 8.5%, after leading the Oct. 18 declines with a 6.9% drop. Whole milk powder was down 3.4%, following a 4.4% drop. Lactose was off 1%. Anhydrous milkfat was down 1.7%, after dropping 2.7%, but butter inched up 0.2%, following a 2.6% decline last time. GDT cheddar inched 0.9% higher after dropping 3.9% Oct. 18.
 StoneX Dairy Group says the GDT 80% butterfat butter price equates to $2.1468 per pound, down 5.8 cents after dropping 16.50 cents in the last event and compares to CME butter which closed Friday at $2.7725. GDT cheddar, at $2.1632, was down 9 cents after losing 8.2 cents and compares to Friday’s CME block cheddar at $2.01. GDT skim milk powder averaged $1.4744 per pound, down from $1.5864 (11 cents), and whole milk powder averaged $1.5519, down from $1.6208 (7 cents). CME Grade A nonfat dry milk closed Friday at $1.40.
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 said 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 September 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.
Nonfat dry milk/skim milk powder totaled 142.8 million pounds, down 7.1%, but dairy exports to Mexico reached a 15-month high driven by skim milk powder.
Butter totaled 10.7 million pounds, up 49.2%, with growth to Canada third largest.
Exports of cheese were up for the 15th consecutive month, hitting 78.8 million pounds, up 5.1%. Cheddar made up 13.8 million of that total, up 51.9%. Exports were strong to Mexico, South Korea and Japan, and grew to United Arab Emirates and Saudi Arabia, according to HGD. Year-to-date cheese exports are up 12.5%, with cheddar exports up 68.8%.
  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. The report 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 market share 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 U.S. 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 hosted farmers and industry groups in Kansas City, Missouri, to discuss meaningful changes to the U.S. dairy pricing system, according to an Edge press release.
 Tim Trotter, Edge CEO, said, “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 toward 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.”