By LEE MIELKE
Mielke Market Weekly 

October butter stocks totaled 138.2 million pounds, according to preliminary data in the USDA’s latest Cold Storage report. That’s down 7.9 million pounds or 5 percent from September and 43.6 million pounds or 24 percent below those in October 2013.

American type cheese, at 612.2 million pounds, was down19.1 million pounds or 3 percent from September and 14 million pounds or 2 percent below a year ago.

The total cheese inventory, at 983.8 million pounds, was down 30 million pounds or 3 percent from September and 35.9 million pounds or 4 percent below a year ago. If the preliminary data is correct, this is the first month that the total cheese inventory has fallen below 1 billion pounds since November 2013.

HighGround Dairy’s Eric Meyer points out that "The days of sharply lower cheese and butter stocks in the United States is nearing conclusion. Though the numbers continue to lag behind the prior year, they are quickly catching up. And on a month-to-month basis, the drawdown between September and October was light, particularly for butter."

Butter inventories remain sharply behind the lofty numbers from 2013, but when looking at the seasonal rise and fall of stocks from this year, it looks surprisingly flat, he said.

From May to October 2014, butter stocks only declined by 54.5 million pounds, while that number in 2013 was 140.1 million, against a 10 year average of 89.4 million. It was the slowest decline since 2011.

Record high prices have likely begun having an effect on domestic fat demand; imported butterfat is reaching the U.S. shores at an increased rate; and more cream is likely working its way into the churn as demand for cream into ice cream production begins to back up.

Looking at cheese, Meyer reports that October Natural American cheese stocks saw monthly declines right at the 10-year average but were the slowest percentage decline since 2010. And all three cheese categories were at their smallest percentages behind 2013 since January.

In the holiday-shortened three-day week, cash block cheese closed Wednesday at $1.6825 per pound, down 4.75 cents on the week, 19.75 cents below a year ago and the lowest price since July 17, 2013.

The barrels closed at $1.6475, down 9.25 cents on the week and 13 cents below a year ago. Only one car of block traded hands on the week and one of barrel. The NDPSR-surveyed U.S. average block price averaged $2.1334, down 7.9 cents, and the barrels averaged $2.0928, down 5.8 cents.

Cheese production is comfortably meeting active sales demand focused on holiday retail buyers, as well as food service customers, according to USDA’s Dairy Market News (DMN).

Milk is adequate, and in some areas there is surplus milk available. Most manufacturers do not have inventory concerns. Plant schedules last week were mixed, with some cheese plants maintaining generally full schedules while other plants adjusted production for downtime.

Cash butter topped $2 per pound Monday, Nov. 24, but dropped 3 cents on Tuesday and closed Wednesday at $1.97 per pound, down 7 cents on the week but still 32 cents above a year ago. Six cars traded hands in the three days. NDPSR butter averaged $1.9953, down a half-cent.

Butter manufacturers were busily filling orders to ensure shipment deadlines for Thanksgiving, according to DMN. Many plants were running schedules at or near capacity levels. However, they are conscious of keeping inventory levels in check as some anticipate weaker prices in the coming weeks. Cream tightened as Class II manufacturers are pulling stronger on cream supplies. Domestic butter interest is strong in both the retail and food service segments. Demand for bulk butter is moderate, while prices range from 3 cents under to 6 cents over market, with various time frames and averages used. The market tone is steady.

Cash Grade A nonfat dry milk closed Wednesday, Nov. 26, at $1.1150 per pound, down 2.25 cents on the week and the lowest spot powder price since February 2010. Seven carloads traded hands last week. NDPSR powder averaged $1.3380, down 10.3 cents, and dry whey averaged 62.77 cents, down 1.3 cents.

Nonfat dry milk prices are lower throughout the country, according to DMN. Manufacturers are seeing steady to marginal increases in production. Demand is light. Dry buttermilk prices continue to decline. The market is growing weaker, as holiday production climbs and buyer interest remains stagnant. The dry whey market tone is weakening, as export markets pressure prices lower. Holiday cheese volumes are encouraging whey production. Inventories are mixed.

Reduced dairy product purchases from China are in stark contrast to the strength those purchases produced a year ago, resulting in record high U.S. cheese and butter prices. Exports have plummeted, and the Russian embargo didn’t help matters any.

The U.S. farmer-funded Cooperatives Working Together (CWT) accepted two requests for export assistance last week from Dairy Farmers of America and Tillamook County Creamery Assoc. to sell 47,179 pounds of Cheddar cheese in Asia and the Middle East. The product will be delivered in December.

Year-to-date, CWT has assisted member cooperatives in selling 99.150 million pounds of cheese, 53.591 million pounds of butter and 56.729 million pounds of whole milk powder to 45 countries on six continents. These sales are the equivalent of 2.535 billion pounds of milk on a milkfat basis. Numbers are adjusted for cancellations, according to CWT.