Market Reports

Last week’s Cold Storage report showed an impressive decline in cheese stocks from March to September. That implies excellent demand for U.S. cheese, driven by spectacular exports. The trade is left to assume that cheese output will step upward several times over the next few months as new and expanded plants start making product.

Dairy market analysts got a surprise this week when USDA released its Milk Production report on Monday with stronger than expected results. But perhaps even more unexpectedly, the agency revised the August figure from a modest loss to a 0.4% increase.

The dairy markets bounced this week, rejecting the notion that lower prices will be necessary to balance supply and demand. After the dramatic declines seen in late September and early October, every product traded at the CME spot market moved upward this week. The bulls have clearly found some traction.

The dairy markets are seeking a balance at prices that encourage greater milk output without killing demand. For several weeks, that required a steep descent from a dizzying peak. This week they appeared to find their footing.

The dairy markets have once again proven the old trading adage that the best cure for high prices is high prices. Butter buyers seem confident that they have enough product to keep cases stocked through the holidays. Plentiful cream and pricey butter kept churns running unusually hard through the summer.

After the fireworks of last week, the cheese markets have spent the past few days coming back to earth. Barrels distanced themselves from the all-time high notched on Wednesday of last week, giving up 29.25¢ since last Friday to end the week at $2.2975/lb. Blocks also moved downward, albeit...