Weaker product prices cut October milk prices, but November started with higher global prices and a strong rebound in U.S. cheese prices, a precursor of better things to come. Find those articles and other dairy economic news updates here.
CME cheese posts gains
The week of Oct. 31-Nov. 4 saw strong gains in cash cheese prices on the Chicago Mercantile Exchange (CME). Cheddar barrels rose 21 cents per pound on the week, to $1.7755 per pound, while 40-pound blocks rose 16.75 cents per pound, to $1.8310 per pound.
After gaining 10.2 cents last week, CME cash butter was also up 1.9 cents per pound this week to $1.8840 per pound.
Global Dairy Trade index makes big jump
Paced by a 19.8 percent increase in the whole milk powder (WMP) price, the Global Dairy Trade (GDT) index rose 11.4 percent during the latest auction, held Nov. 1.
Compared to the previous auction, prices were higher for anhydrous milk fat (+2.6 percent to $5,146 per metric ton); butter (+4.0 percent to $4,146 per MT); cheddar cheese (+0.9 percent to $3,332 per MT); skim milk powder (+6.5 percent to $2,329 per MT) and WMP (+19.8 percent to $3,317 per MT).
Decliners included: buttermilk powder (-5.4 percent to $2,248 per MT); lactose (-4.0 percent to $755 per MT) and rennet casein (-4.8 percent to $6,025 per MT).
The next GDT auction is Nov. 15.
Observations: “While I was expecting a bump in GDT pricing, this surge is phenomenal and US domestic pricing is going to follow higher as the export machine kicks up another gear.” -- Marvin J. Hoekema, M.S., President, Dairy Decisions Consulting, LLC
September dairy products report
A summary of September 2016 dairy product production compared to the previous year and month follows:
• Total cheese output (excluding cottage cheese) was 981 million pounds, 1.6 percent more than September 2015 but 1.8 percent less than August 2016.
• Italian-type cheese production totaled 421 million pounds, 4.4 percent more than September 2015 but 0.9 percent less than August 2016.
• American-type cheese production totaled 378 million pounds, 0.3 percent less than September 2015 and 2.9 percent less than August 2016.
• Butter production was 133 million pounds, 0.4 percent less than September 2015 but 2.3 percent more than August 2016.
Compared to the same month a year earlier:
• Nonfat dry milk production was 126 million pounds, up 4.7 percent.
• Skim milk powders production was 38.4 million pounds, up 43.3 percent.
• Dry whey production was 74.5 million pounds, down 6.0 percent.
• Whey protein concentrate production was 34.2 million pounds, down 8.7 percent.
Observations: HighGround Dairy called the report neutral for cheese and dry whey, bullish for butter and bearish for nonfat dry milk and lactose.
Dairy Margin Watch: October ends flat to stronger
Dairy margins were flat to slightly stronger over the last two weeks of October, according to the latest CIH Margin Watch report from Commodity & Ingredient Hedging LLC. Higher milk prices offset slightly higher feed costs.
Milk prices were supported by improving cheese and butter prices on the Chicago Mercantile Exchange, despite recent USDA Cold Storage data indicating lofty stocks of both products. Cheese in cold storage as of Sept. 30 totaled 1.238 billion pounds, down 3.1 million pounds or 0.25 percent from August, but 7.42 percent higher than last year. The September draw was also much more modest than the average of 2.09 percent over the past decade. Butter in cold storage totaled 269.17 million pounds, down 15.6 percent or 49.6 million pounds from the previous month, but 81.642 million pounds or 43.5 percent higher than last year.
USDA reported September milk production at 16.97 billion pounds, down 0.9 percent from August, but 2.1 percent higher than last year. While total U.S. production experienced a seasonal decline, milk production in the main cheese-producing states continued to advance, led by Wisconsin and Idaho.
Feed costs held relatively steady over the past two weeks with corn trading sideways and soybean meal slightly higher. Harvest is winding down across much of the Midwest and attention has increasingly shifted to demand. Weekly export sales and shipments of both soybean meal and corn have been quite strong, although in line to meet current USDA projections.
Visit the Margin Manager website.
October FMMO Class III/IV prices fall
Federal milk marketing order (FMMO) Class III and IV minimum prices weakened in October.
FMMO Class III ($ per hundredweight)
October 2016 – $14.82
September 2016 – $16.39
October 2015 – $15.46
January-October 2016 – $14.42
January-October 2015 – $15.98
FMMO Class IV ($ per hundredweight)
October 2016 – $13.66
September 2016 – $14.25
October 2015 – $16.43
January-October 2016 – $13.65
January-October 2015 – $13.97
Source: USDA Ag Marketing Service
October California Class 4a/4b milk prices down
California's minimum Class 4a/4b milk prices declined for a second consecutive month in October.
California Class 4a ($ per cwt)
October 2016 – $13.11
September 2016 – $13.58
October 2015 – $15.72
January-October 2016 – $13.25
January-October 2015 – $13.81
California Class 4b ($ per cwt)
October 2016 – $14.34
September 2016 – $15.24
October 2015 – $14.75
January-October 2016 – $13.72
January-October 2015 – $14.63
Source: California Department of Food and Agriculture
Farmers Union: Dairy farm share of retail milk price slips
Based on national price estimates, U.S. dairy farmers saw their share of the retail fluid milk dollar decline in September, according to the National Farmers Union (NFU).
A dairy producer’s share of a gallon of fat-free milk, selling for $4.49 at retail, was $1.44 or about 32 percent. The NFU’s market share calculation compares USDA’s monthly average all-milk price paid to dairy farmers with the average price paid in Safeway stores
Overall, U.S. farmers and ranchers receive about 17.4 cents for every $1 spent by consumers for food at the retail level. More than 80 cents per $1 went for marketing, processing, wholesaling, distribution and retailing.
View the National Farmers Union latest Farmer’s Share infographic here. 
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Dave Natzke
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