Market Reports

The factors that propelled milk prices above $25 per cwt. this summer are no longer in play. But those extremely bullish forces will continue to impact the markets for a little while longer, as exporters fill orders signed months ago when most U.S. dairy product prices were more competitive than they are today.

Dairy markets headed into the Thanksgiving weekend with a double portion of USDA reports and finished with a mountain of data to swallow from today’s Dairy Products report. News of lower milk output in Australia and New Zealand made for appetizing side dishes together with news that the Federal Reserve might increase interest rates at a trot rather than a gallop.

CME spot butter managed to keep climbing through Wednesday before it finally turned back. Butter’s resilience has taken the market by surprise. Retailers bought butter aggressively in September and October to stock up for the holidays.

Class III milk futures leapt to their highest values in a month or more, and Class IV contracts staged a decisive comeback. CME spot Cheddar blocks vaulted 19ȼ to $2.20 per pound, their highest price since June. Barrels rallied 8.75ȼ to $2.0625.

The meltdown in the butter market dragged November Class IV down. Pricey cream discouraged churns from running hard in early September, and butter output is down 1.4% from a year ago. Butter makers have stepped up the pace but the market makes clear that butter supplies remain tight

U.S. milk output is now growing at a historically normal rate, but there are many barriers to more rapid expansion, including onerous feed costs and self-imposed supply management restrictions.