By LEE MIELKE
Mielke Market Weekly 

Global prices are feeding the bears, dropping in the Global Dairy Trade (GDT) auction Tuesday, Nov. 4, after slipping Oct. 20, reversing gains in the previous four sessions. The weighted average for all products was down 7.4 percent following a 3.1 percent loss last time and a 9.9 percent increase Oct. 6. Losses appeared on all products offered last Tuesday.

FC Stone reports the average GDT butter price equated to about $1.1677 per pound U.S., down from $1.2927 in the October 20 event. Contrast that to CME butter, still in the stratosphere Friday, Nov. 6, at $2.8850 per pound. GDT Cheddar cheese equated to about $1.3548 per pound U.S., down from $1.4345 last time, and compares to Friday’s CME block Cheddar at $1.70 per pound. GDT skim milk powder, at 91.53 cents per pound U.S., is down from 98.79 cents per pound last time, and the whole milk powder average, at $1.1128 per pound U.S., is down from $1.2219 in the last event. The CME Grade A nonfat dry milk price closed Friday, Nov. 6, at 81 cents per pound.

HighGround Dairy’s Eric Meyer wrote in his post GDT analysis, "In just 92 minutes, Tuesday’s GDT trading event delivered a swift blow to the optimism that had begun to simmer more than two months ago in New Zealand. Though milk production was in decline during August and even further down in September versus a year ago, farmers and dairy product sellers in that region figured that at least prices were on the rise as buyers scrambled to add coverage ahead of El Nino fears. But the reality of two key fundamental factors continues to set in amongst market participants. First, the decline of NZ milk production is more than being made up for in gains from other regions of the world (particularly Europe). And the strong volumes in global trade that occurred months ago as prices were in swift decline had been for increasing stock levels, not for incremental demand, and buyers are now sitting on their hands and working through those inventories. As a result, the GDT auction came in well below expectations (across nearly every commodity) and with it carries a bearish feel in the near term."

Back on the home front, you’ll recall preliminary USDA data put September milk production at 15.6 billion pounds, up just 0.4 percent compared to September 2014. USDA’s latest Dairy Products report shows where that milk went.

Total cheese output hit 956 million pounds, down 2.3 percent from August, but 2.4 percent above a year ago, and year to date (YTD) production, at 8.7 billion pounds, is up 2.5 percent from a year ago. Italian cheese hit 403.5 million, down 1.6 percent from August, up 0.4 percent from a year ago, with YTD at 3.8 billion pounds, up 2.2 percent. Mozzarella, at 317.7 million pounds, was up 0.6 percent from a year ago and YTD totaled 2.96 billion pounds, up 1.1 percent.

American type cheese production totaled 375.8 million pounds, down 3.8 percent from August, up 2.8 percent from a year ago, with YTD output at 3.5 billion pounds, up 3.0 percent. Cheddar output amounted to 267.5 million pounds, up 3.8 percent from a year ago; with YTD at 2.5 billion pounds, up 2.8 percent.

Churns produced 134 million pounds of butter, up 4.3 percent from August and 0.9 percent above 2014. YTD output is 1.4 billion pounds, down 1.4 percent.

Nonfat dry milk output totaled 120.5 million pounds, down 3 percent from August, but up 7.3 percent from a year ago, with YTD output hitting 1.4 billion pounds, up 8.3 percent. Less milk went to skim milk powder, which totaled 26.8 million pounds in September, down 34.4 percent from a year ago, with YTD output at 320.6 million pounds, down 24.8 percent from a year ago.

The report pegged September nonfat dry milk stocks at 211.5 million pounds, down 8.5 percent from August but 24.6 percent above those a year ago.

HighGround’s Eric Meyer says, "With only 0.4 percent U.S. milk production growth in September versus the prior year, it remains economically favorable to produce cheese and similar to what has been seen for 12 consecutive months now, Wisconsin’s total cheese production continues to see impressive year-over-year gains. Year-over-year cheddar production in that state was up 6.2 percent YOY, Natural American 6.8 percent higher, and total cheese UP 3.2 percent."

"California’s cheese production numbers saw the second consecutive loss of more than 3 percent versus September 2014. Even so, this was the largest amount of cheese produced during September on record."

"Butter production is following its seasonal tendency to increase into September though only slightly higher than 2014. Seeing an increase in butter production at all could create an instant bearish reaction as September butter exports were weak (down 83 percent YOY), imports continue to trend higher (up 117 percent YOY) and inventory levels remain historically high (up 23 percent YOY). But instead, prices have remained uncharacteristically high at the CME this week as incremental domestic holiday demand prevails and availability of bulk butter remains nearly impossible to find," Meyer wrote.