The Federal Reserve lowered its key interest rate by a quarter point

You’ll recall September milk production was up 0.1% from a year ago, and components were up as well. The September Dairy Products report shows where the milk went.

Cheese production totaled 1.160 billion pounds, down 3.1% from August and only slightly above Sept. 2023. Year to date (YTD) 10.7 billion pounds had been produced, up 0.5% from 2023.

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Wisconsin produced 283.2 million pounds, down 3.9% from August, and 0.9% below a year ago. California output fell to 200.5 million pounds, down 6.0% from August, and 2.3% below a year ago. Idaho provided 89.6 million pounds, up 3.4% from August and 2.5% above a year ago. New Mexico vats produced 75.0 million pounds, down 15.9% from August, and 3.0% below a year ago.

Italian cheese output totaled 486.6 million pounds, down 2.7% from August but 1.5% above a year ago. American output fell to 455.8 million pounds, down 4.4% from August and 3.7% below a year ago. Mozzarella, at 389.6 million pounds, was up 2.7% from a year ago.

Cheddar production dropped to 311.8 million pounds, down 9.6 million or 3.0% from August, and down 8.2 million pounds or 2.6%, from a year ago. YTD cheddar stood at 2.9 billion pounds, down 6.5% from a year ago.

Butter production, at 159.2 million pounds, was virtually unchanged from August, but was up 16.1 million pounds or 11.3% from a year ago. YTD butter was at 1.7 billion pounds, up 5.8% from 2023. This output represents a new high for the month of September and follows a record high in August.

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Yogurt totaled 431.1 million pounds, up 7.1% from a year ago, with YTD output at 3.7 billion, up 4.8%. Hard ice cream, at 59.3 million pounds, was down 2.8% from 2023. YTD, 564.2 million pounds had been produced, up 2.0% from a year ago.

Dry whey output inched up to 68.0 million pounds, up 2.8 million pounds or 4.2% from August, but was down 10.9 million or 13.8% from a year ago. YTD whey was at 661.5 million pounds, down 8.4%. Whey stocks slipped to 56.7 million pounds, down 1.8 million or 3.1% from August, and down 26.6 million pounds or 31.9% from a year ago.

Nonfat dry milk (NFDM) output, at 114.3 million pounds, was down 1.9 million pounds or 1.6% from August, but was up 14.3 million or 14.3% from a year ago. YTD NFDM was at 1.3 billion pounds, down 12.5% from a year ago.

Stocks fell to 249.7 million pounds, down 11 million, or 4.2% from August, but up 9.1 million pounds or 3.8% from 2023.

Skim milk powder (SMP) production climbed to 53.2 million pounds, up 2.9 million pounds or 5.8% from August, but was down 14.5 million or 21.4% from a year ago. YTD SMP was at 414.7 million pounds, down 18.0% from 2023.

The Nov. 4 “Daily Dairy Report” (DDR) points out that “Higher protein products continued to dominate the whey stream as production of whey protein isolates leapt 22.5% year over year in September to 17.11 million pounds. The manufacture of whey protein concentrates fell 9.8% while output of dry whey for human consumption fell 14% to just 65.18 million pounds.”

The DDR’s Sarina Sharp wrote in the November 1 Milk Producers Council newsletter “Dairy markets are awash in cream, thanks to relentless increases in butterfat component levels. Through September, the U.S. dairy herd made 0.7% less milk than in the first nine months of 2024. But over the same period, butterfat output jumped 1.9%. That made a huge difference in the value of cream. From coast to coast, multiples are trading below their seasonal averages,” says Sharp.

U.S. dairy exports rose in September. The USDA’s latest data shows cheese sailings totaled 86.3 million pounds, up 6.8% from a year ago, however HighGround Dairy (HGD) points out that shipments to the top five U.S. destinations declined. HGD also reminded us “Barrel cheese prices exceeded $2 per pound in mid-June, when some of these sales would have been booked, with blocks approaching similar levels and those prices may have softened demand.”

Butter exports hit 5.6 million pounds, up 22.6%, and nonfat/skim milk powder totaled 138.2 million pounds, up 15.6%. HGD says “Compared to September 2022, when demand for U.S. product was notably stronger, this year’s shipments were down 6%. The largest jump over prior year was exports to Mexico, followed by the Philippines.”

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Dry whey exports totaled 37.9 million pounds, up 9.3%. HGD adds that “Sweet whey powder exports rose year-over-year for the fourth consecutive month, reaching their highest levels since March 2023. Year to date totals have turned positive, after lagging behind 2023’s figures from February through August.”

Butter imports reached record levels, according to HGD, as “Importers likely brought more product ashore due to concerns about a dockworkers’ strike. While the strike occurred, it resolved in less than a week, and it seems likely that after two big months of imports, October’s data point may be lower.”

In other trade news, butter led the jump in Tuesday’s Global Dairy Trade auction where the weighted average was up 4.8% in the first event of November.

It follows a 0.3% decline on Oct. 15. Volume topped 80 million pounds for the fifth consecutive event, totaling 80.7 million pounds, down from the 85.9 million on Oct. 15. The average metric ton price, at $3,997 U.S., was up $145.

Butter was up 8.3%, after slipping 0.3% on Oct. 15. Anhydrous milkfat was up 4.6% following a 0.3% gain. Cheddar was up 4.0% and followed a 4.2% rise. Mozzarella was up 0.9% after plunging 8.2%. Whole milk powder was up 4.4%, unchanged in the last event, and skim milk powder was up 4.0%, after falling 1.8%. The only decline was on lactose, down 6.1%, after dropping 5.8% Oct. 15.

StoneX says the GDT 80% butterfat butter price equates to $3.0932 per pound U.S., up 21.9 cents from Oct. 15, and compares to CME butter which closed Friday at $2.65. GDT cheddar, at $2.2559, was up 12.3 cents, and compares to Friday’s CME block cheddar at $1.72. GDT skim milk powder averaged $1.2925 per pound, up from $1.2452, and whole milk powder averaged $1.6841 per pound, up from $1.6115. CME Grade A nonfat dry milk closed Friday at $1.3875.

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While Wall Street rejoiced in President Trump’s decisive win in Tuesday’s election and the Federal Reserve lowered its key interest rate by a quarter point, many members of the dairy industry gathered in Chicago for the American Dairy Products Institute (ADPI) Dairy Purchasing and Risk Management seminar.

When asked about it in the Nov. 11 Dairy Radio Now broadcast, StoneX broker Dave Kurzawski said the ADPI seminar will inspire, teach and educate new entrants in the industry, as well as some older ones, on using risk management because, “If you want to be in the business long term you have to take a real serious look at risk management.”

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Trump winning the presidency is a big deal for the markets at large, he said, and we saw a bullish dollar in response which tends to be bearish to commodities. “Dairy is a commodity that will play into this but at the moment I don’t think it changes anything from the standpoint that certain products here in the U.S., including and especially cheese, is really priced attractively to move to export.”

Regarding risk management, as we face possible changes by USDA in how milk is priced, I ask, how that affects risk management. Kurzawski said we don’t know the rules yet and we’ll get them on November 12 in the final language, after which Federal order producers will vote and we’ll go from there, he concluded.

Cash block cheese closed Friday at $1.72 per pound, down 11.75 cents on the week, lowest CME price since April 19, but was still 12 cents above a year ago.

The barrels finished at $1.7675, down a dime on the week, also the lowest since April 19, 11.75 cents above a year ago, and an inverted 4.75 cents above the blocks. CME sales totaled just 5 cars of block and 1 of barrel for the week.

Midwest cheesemakers tell Dairy Market News (DMN) that demand remains about the same and ranges from seasonally slow to very active. Some Italian style cheesemakers were turning away bids. Cheese production is ticking up and some plants are running full schedules. Others say their downtime, which has been amplified in recent weeks as processors work on upgrades and seasonal maintenance, is beginning to ebb. Milk availability is somewhat snug in the region. Mid-week prices were reported from 50 cents to $1.50-over Class III. Last year, they ranged from 25 cents to $1.25-over Class, according to DMN.

Western milk demand remains strong from cheesemakers, though some parts are finding less milk available. Production is strong with the Thanksgiving holiday getting closer, while others say output is steady. Retail demand is steady, food service demand steady to lighter and international buying is steady, says DMN.

Butter closed Friday at $2.65 per pound, down 2 cents on the week but 5 cents above a year ago when it plunged almost 51 cents to $2.60. There were 10 loads that exchanged hands on the week.

Midwest butter makers report that retail orders are in line with previous years during the holiday run up, but food service demand remains somewhat hushed. Contacts contend market price downturns since the $3 per pound plus prices earlier in mid-September to the recent prices at around the $2.70 have created hesitation. Cream availability remains widely available. Plants are turning away offers from cream suppliers at multiples that, during previous years at this time, would be considered a bargain, says DMN.

Butter production in the West is steady to strong. Retail and food service continues receiving a heavier focus than bulk output. Cream remains plentiful and cream multiples are comparatively lower than in 2023. Retail demand varies from steady to stronger, while food service is steady to lighter.

Grade A nonfat dry milk, aided by the week’s GDT, climbed to $1.3950 per pound Tuesday, highest since Sept. 11, but closed the week at $1.3875, a penny higher, and 18.75 cents above a year ago, with 11 sales put on the board.

Dry whey closed Friday at 63 cents per pound, up 2.50 cents on the week, highest since April 22, 2022, and 23.25 cents above a year ago, on 10 sales.

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“Dairy margins deteriorated in nearby fourth quarter over the last half of October, while holding largely steady in deferred periods,” according to the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC.

“CME Milk futures continued to sell off in nearby expirations while trading sideways further out on the curve with feed costs mixed,” the MW said. “USDA’s Milk Production report surprised the market with September output estimated at 18.19 billion pounds, up 0.1% from last year.”

“August’s production was revised up to reflect a 0.4% increase from 2023 compared to the initial forecast of a 0.1% decline. The report indicates that milk production has finally stabilized based on year-over-year comparisons following 14 consecutive months of deficits relative to the prior year. California’s production was on par with the prior year despite the widespread outbreak of avian influenza among the state’s dairy herd which was likely not reflected in the data. Production was likewise down in the second largest state of Wisconsin although increases in states such as Idaho, Texas and New York more than offset that.”

The MW reported highlights from the September Cold Storage report, pointing out that estimated butter stocks saw “The largest year-over-year increase in 16 months, and cheese stocks showed the largest year-over-year decline since mid-2014 and the seventh consecutive month of lower prior-year comparisons.”

“Overall milk production is steady to stronger across the country,” according to DMN. “In warmer states in the Southeast and throughout the Midwest, fluid numbers are steady. Farm level milk is gradually ticking up in the Northeast, Arizona, and New Mexico. Larger gains in production are being seen in the mountain states and the Pacific Northwest. The better numbers are being attributed to cooler temperatures and improved cow comfort.”

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DMN warns “California farmers are experiencing herd health issues, contributing to the state seeing weaker volumes at the farm level.” There have been 140 new cases of avian influenza in the last 30 days according to USDA’s Animal and Plant Health Inspection Service. And while some contacts tell DMN that component percentages are currently in line with spring flush levels, my ear to the rail is hearing devastating declines in milk output and cow health and breeding issues. This no doubt will show up in the next Milk Production report and will have a tremendous impact for many years to come.

Meanwhile, the Agriculture Department’s World Agricultural Supply and Demand Estimates report issued Friday morning raised the milk production forecast for 2024 from last month. The increase was based on the most recent Milk Production report and lower reported milk cow numbers for the third quarter 2024 being more than offset by higher output per cow. The milk forecast for 2025 was unchanged. I’ll report complete details and milk price forecasts next week.

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Dairy cow slaughter for the week ending Oct. 26, totaled 50,200, down 2,700 from the previous week, and 5,300 or 9.5% from a year ago. Year to date, 2,255,000 have been “retired,” down 346,000 or 13.3% from a year ago.

The U.S. corn harvest was at 91%, as of the week ending November 3, up from 81% the previous week, 13% ahead of a year ago, and 16% of the five-year average. Soybeans are at 94%, up from 89% the previous week, and 5% ahead of a year ago and 9% ahead of the five-year average.

Lee Mielke is a graduate of Brown Institute in Minneapolis, Minnesota. He’s formerly the voice of the radio show “DairyLine” and his column appears in agricultural papers across the U.S. Contact him at [email protected].