Cheese prices were mixed in the Labor Day holiday-shortened week. The blocks closed the first Friday of September at $1.83 per pound, down a penny on the day, up a penny on the week and 4.5 cents above a year ago. Barrels closed at $1.7750, down a quarter-cent on the week and 5.5 cents above a year ago. Eleven cars of block traded hands on the week and four of barrel. The AMS-surveyed U.S. average block price hit $1.8469, up 3.5 cents, while the barrels averaged $1.8313, down 0.1 cent.

USDA’s Dairy Market News (DMN) says cheese manufacturers in all regions of the country would increase production if more milk was available. Recent heavy CME sales were attributed to “buyer demand which found less cheese available from manufacturers than desired, taking some buyers to the CME as a result.” Some demand is from buyers who seek cheese in addition to already contracted levels, DMN said. Buyers are alert for available cheese, but also being cautious about locking in a price. Many manufacturers anticipate some milk tightness relative to demand in the near future, as milk production continues to reflect the impact of summer weather and resulting feed prices. 

Market analyst Jerry Dryer wrote in his Aug. 31 Dairy and Food Market Analyst newsletter that he believes cheese prices will continue to move in a fairly narrow range; possibly for the entire month of September but he warned that “We could see some downward pressure over the next couple of weeks.

Among numerous conversations, two go a long way toward summing up the current market situation, Dryer wrote; “Domestically, a veteran marketer said: Overall business is good; not a barn burner, but not bad. Internationally, a veteran trader said: They’re (international buyers) grumbling about the price, but they’re still placing orders. Some are just filling in and waiting for a deal out of Oceania, but right now they’re still buying.”

By the end of September, reality will have settled over the market, according to Dryer. Cheese supplies here and around the world will clearly be short of the pending holiday demand.” 

Butter wise, the spot price inched a half-cent lower Friday, to $1.8650, up 2.5 cents on the week, the 11th week of gain, but 4.75 cents below a year ago. Eleven cars sold on the week. The AMS average was $1.7686, up 1.1 cent.

Churning across the country is mixed and continues to depend on cream availability and price, said the USDA. Some butter producers indicate that standardized cream volumes are increasing as school bottling programs gear up. In recent weeks, churning schedules were often not keeping pace with demand and inventoried stocks were being used. 

The Cold Storage report indicated the July drawdown was heavier and earlier than normal. Overall butter demand is steady at good levels. Retail orders are the strongest with food service easing.

Cash Grade A nonfat dry milk held all week at $1.70 while Extra Grade inched a penny higher to $1.6350. AMS powder averaged $1.3263, up 3 cents, and dry whey averaged 55.97 cents, up 1.2 cents on the week.

Milk supplies vary by region, according to the USDA. Milk supply and demand are reportedly in balance in the Central region where refilling the school pipeline occurred easily this year. Shipments into the Southeast were phasing in gradually. Requests for fluid milk from the Southwest appeared the last week of August which, according to some milk handlers, was an unusual pattern. 

California milk output was leveling off after several weeks of very hot weather. Processing plants were running at reduced levels with some reporting milk levels 3-5 percent or more below a year ago. Manufacturing milk supplies in the Northeast and Mid-Atlantic have declined with the increase in Class I demand from schools are back in session. Tropical storm Isaac was not the event forecast for Florida and many schools that were scheduled to close did not, resulting in strong Class I demand. 

Milk production in the Oceania region is trending higher and moving off the low point of the production year. Situations are generally quite favorable from both weather and water standpoints, according to USDA, but weather forecasters are predicting effects of an El Nino cycle that could include dryer summer conditions. This could affect crop and pasture growth more in dry land production areas. Australian output in June was reported to be 4.3 percent higher than June 2011 and up 4.2 percent year to date. 

FC Stone dairy broker Dave Kurzawski said this week’s Global Dairy Trade auction priced index leapt 6 percent over the previous report, as global demand for dairy products remains robust. The gap between U.S. and Oceania prices narrowed, but U.S. prices are still above Oceania’s.

Cooperatives Working Together (CWT) accepted seven requests for export assistance this week to sell 734,139 pounds of cheese; 352,740 pounds of butter; and 44,082 pounds of anhydrous milk fat (AMF) to customers in Asia, Central America and the Middle East. The product will be delivered December 2012 and raises CWT’s 2012 cheese exports to 79.1 million pounds plus 56.7 million of butter, and 123,459 pounds of AMF to 34 countries on four continents. 

CWT Chief Operating Officer Jim Tillison said in Thursday’s DairyLine that CWT’s export assistance program is as, if not more effective than herd retirements and “better than taking dairy cows and dairy farmers out of business.”