By LEE MIELKE
Mielke Market Weekly 

The loud crash you heard last week was the Chicago Mercantile Exchange butter price, which ended four weeks of big gains.

Just as it rocketed $1.1450 higher in August to a record high $3.1350 per pound in late September, it quickly reversed gears last week, closing at $2.50 per pound, down 63.5 cents on the week and 39.5 cents below a year ago when it plunged 5.5 cents, from what was then a record high. The 30-cent crash Tuesday, Sept. 29, was the largest, single-day spot decline since March 26, 2004, but the volatility, or whatever you call it, is reportedly sending traders to their chiropractors with neck injuries from quick head movements. Twenty seven cars traded hands last week.

The Sept. 30 Daily Dairy Report suggests tightness of salted, bulk butter may have been behind the volatility. Dairy Market News (DMN) reports that bulk butter demand is making a comeback as buyers witness lower prices, but butter producers are hesitant to build inventories much beyond booked sales. 

Central manufacturers report cream is available, with some Western cream clearing into the Central region to meet demand. The increased availability of cream is also a result of Central ice cream producers slowing production.

Cash block cheese reversed the previous week’s 10.25-cent plunge, closing Friday (Oct. 2) at $1.7475 per pound, up 15.75 cents on the week but 40.25 cents below a year ago. The barrels started the week with a loss but gained it back and then some, finishing at $1.6175, up 6.75 cents on the week, 55.25 cents below a year ago, and an unsustainable 13 cents below the blocks. Twenty three cars of barrel traded hands last week. The gains in block all came on unfilled bids.

Most Midwest cheesemakers are producing cheese using regular milk supplies, with little evident interest in securing extra milk, DMN says. Regular milk supplies range from mostly even with the previous week, to slightly lower. Cheesemakers looking for extra milk saw offers 50 cents to $1.00 over Class, which in many cases is more than they want to pay. Some are fortifying vats with nonfat dry milk. 

Barrel cheese manufacturers fielded multiple calls last week from buyers. With production mostly geared toward regular milk supplies, some prospective customers for barrels may have to keep checking around.

Manufacturers are better situated to accommodate block buyer interest, relying on current output and inventories. There is some additional current buyer interest geared toward having cheese ready to go into the pipeline and ultimately to retail stores for end-of-year holiday demand.

Mozzarella demand continues to be strong for frozen pizzas and food service sales, according to DMN.

Western cheese makers report milk supplies are sufficient for cheese production. Some manufacturers are filling production schedules with non-cheddar type cheeses. The pizza demand for mozzarella is good. Cheese production is steady and trying to keep pace with consumer demand. 

Cash Grade A nonfat dry milk topped $1 per pound for the first time since March 10, 2015, closing Oct. 2 at $1.06 per pound, up 12 cents on the week but 33.5 cents below a year ago. Fifteen cars found new homes last week at the CME.

Lower feed costs and a higher All Milk price nudged the August milk feed price ratio to 2.11, up from 2.01 in July, up from 2.06 in June, but down from 2.63 in August 2014, according to the USDA’s latest Ag Prices report.

The index is based on the current milk price in relationship to feed prices for a ration of 51 percent corn, 8 percent soybeans and 41 percent alfalfa hay. One pound of milk today purchases 2.11 pounds of dairy feed containing that blend.

The August U.S. average All-Milk price was $16.70 per cwt., up 10 cents from July but $7.50 below August 2014. 

August corn, at $3.68 per bushel, was down 12 cents from July but 5 cents a bushel higher than August 2014. Soybeans averaged $9.71 per bushel, down 24 cents from July, and $2.69 per bushel below August 2014.

Alfalfa hay averaged $159 per ton, down $10 from July, and $48 per ton below August 2014. Looking at the cow side of the ledger, the August cull price for beef and dairy combined averaged $110.00 per cwt., down $3 from July, $11 below August 2014, and that compares to the 2011 base average of $71.60 per cwt. 

Based on data from the Ag Prices report, the dairy Margin Protection Program (MPP) margin for the July-August period is $7.6951, 30 cents less than the maximum protection level of $8 per cwt., according to the Daily Dairy Report. 

The DDR says the 261 producers who selected the highest protection level will receive a payment after accounting for the 7.3 percent federal sequestration deduction but adds, "Looking forward, higher milk components and lower feed prices are expected to reduce the likelihood of a MPP payment next period."

The USDA’s latest National Milk Cost of Production report shows July total costs were up from June but still below July 2014.

Total feed costs averaged $12.46 per cwt., up $1.11 from May, up 80 cents from May, but still $1.34 below July 2014. Purchased feed costs, at $6.98 per cwt., were up $1.10 from the revised May level, up $1.07 from May, but 17 cents below July 2014.

Total costs, including feed, bedding, marketing, fuel, repairs, hired labor, taxes, etc., of $24.03 per cwt. were up $1.34 from June, $1.19 above May, but 72 cents below a year ago. Feed costs made up 51.9 percent of total costs in July, compared to 50.0 percent the month before and 55.8 percent a year ago.