Market Reports

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.

Despite challenging weather and margin complications, each of the major dairy states saw volumes rise. Production growth was driven by both stronger yields and a modestly larger herd.

Some of these dynamics were foreshadowed by declines at last week’s Global Dairy Trade auction. Every product lost ground at the auction, though the biggest declines were seen by butter, buttermilk powder, and whole milk powder.