Market Reports

Cheese vats remain full, despite lower milk output. U.S. cheese production reached 1.19 billion pounds in October, up 0.8% from the year before. Given the continued investment in U.S. cheese production capacity, cheese output is likely to grow for the foreseeable future, to the detriment of U.S. cheese and Class III prices. But the details of U.S. cheese production offered some fodder for the bulls. In October, cheesemakers shifted milk into fresh cheeses like cream cheese and Neufchatel (+6.8% year-over-year), cottage cheese (+13%), Hispanic cheeses (+5.7%), ricotta (+12.2%) and Mozzarella (+2.3%).

U.S. milk production slumped deeper into the red in October as poor margins and tight heifer supplies trimmed the dairy herd. Production grew at a healthy clip in the Mideast, and the Midwest and Northeast contributed moderate growth. But output was down hard in the Northwest, Southwest, and California.

The holiday season is upon us, but the dairy markets haven’t been feeling particularly festive. Nearly all products lost value over the course of the week as plentiful supply and understated demand collided to pull prices downward.

After more than a month in the stratosphere, the butter market plummeted back to earth. CME spot butter crash-landed today at $2.60 per pound, down 50.75ȼ from last Friday and more than 90ȼ lower than the all-time high set five weeks ago. Cooler weather has boosted milk production and component levels, and cream is more widely available.

There was a lot of red ink on LaSalle Street this week, and every product at the CME spot market finished lower. Most milk futures also finished the week below where they began it, although losses were relatively modest. November through January Class III futures traded in the low $17s. November Class IV futures settled at a buoyant $20.75 per cwt., but the other contracts hovered in the $18s and $19s.

SMP fell hard at the GDT Pulse event on Tuesday. It’s too soon to know whether the Pulse auction represents a good indication of global SMP values or if it can be dismissed due to limited participation in such a nascent event. But it certainly sparked fears about the health of global demand for milk powder.