Market Reports

Never doubt the power of the profit motive in a free market. In the face of a devastating virus and a systemic heifer shortage, American dairy producers nevertheless found a way to add cows and boost milk production.

Soaring temperatures, summer shortages, and sky-high prices are out of season as the cheese and butter markets hunker down for the winter. So far, pre-holiday demand has not impressed. Demand is simply not keeping pace with current production.

CME spot Cheddar blocks plummeted 11.75ȼ and closed at $1.72 per pound, their lowest price since April. Barrels lost a dime and finished at $1.7675, also a six-month low.

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...

U.S. milk output fell short of year-ago volumes for the 14th straight month in August. The deficit was narrow; production was just 0.1% lower than August 2023. Given sizable improvements in milk components, butterfat and protein output were surely higher than last year, and it’s possible that milk solids output also topped August 2023 volumes. But August 2023 set a very low bar, and, at least on a fluid basis, U.S. milk output failed to clear it.