By Lee Mielke
Mielke Market Report 

Cash butter sustained the late-August rebound and then some after setting a new record high Thursday, Sept. 4, at $2.84 per pound, only to add another half-cent on Friday and close at $2.8450 per pound, up 9 cents on the week and $1.4150 per pound above a year ago. Seventeen cars were sold on the week. NDPSR butter averaged $2.6682, up 13 cents.

Butter production in the Central region increased, reflecting additional milk and cream supplies becoming available throughout the holiday weekend, according to DMN. Domestic demand is keeping pace, despite the current high prices. Some buyers noted lead times for new orders are growing. The Dutch and GDT butter markets were bearish, leaving new export sales limited. Near-record U.S. prices are keeping many manufacturers from building butter stocks effectively for upcoming Fourth Quarter demand.

Western butter production is good as some increased cream volumes became available over the holiday weekend. Butter producers are increasingly concentrating on filling retail orders for upcoming fall needs.

Cash Grade A nonfat dry milk closed Labor Day Week at $1.3325 per pound, up three-quarter cents on the week but still at a two-year low. Only one car was sold last week in the spot market. NDPSR powder averaged $1.7223, down 6.6 cents, and dry whey averaged 68.74 cents per pound, up 1.3 cents.

The USDA announced the August Federal order Class III benchmark milk price Thursday, Sept. 4, at $22.25 per cwt., up 65 cents from July, $4.34 above August 2013, $2.29 above the comparable California 4b cheese milk price, and equating to about $1.91 per gallon. There’s more to come next month as the September futures contract was trading late Friday morning, Sept. 5, at $24.25 before heading back down in its seasonal descent. The 2014 Class III average now stands at $22.49, up from $17.72 at this time a year ago and $16.23 in 2012.

Looking beyond September, the October contract was trading Sept. 5 at $22.53; November, $20.41; and December, $19.37. That would result in a 2014 average of $22.21, up from $17.99 in 2013 and $17.44 in 2012.

The August Class IV price is a record high $23.89 per cwt., up 11 cents from July and $4.82 above a year ago. The Class IV eight-month average now stands at $23.28, up from $18.37 a year ago and $14.95 in 2012.

The four-week, NDSPR-surveyed cheese price average used to calculate this month’s Class prices was $2.1074 per pound, up 5.9 cents from July. Butter averaged $2.5206, up 17.3 cents. Nonfat dry milk averaged $1.7887, down 7.3 cents, and dry whey averaged 68.80 cents per pound, down fractionally.

The California Department of Food and Agriculture announced the State’s August 4b cheese milk price Sept. 2 at $19.96 per cwt., up $1.27 from July and $3.64 above August 2013. That propels the 4b 2014 average to $20.30, up from $16.03 at this time a year ago and $14.34 in 2012.

The August 4a butter-powder milk price is a record high $23.83 per cwt., up 25 cents from July and $5.13 above a year ago. The 4a average now stands at $23.13, up from $18.12 a year ago and $14.66 in 2012.

Meanwhile, milk prices will remain strong for a while as cash cheese prices strengthened in the shortened Labor Day holiday week, a sixth week of gain while cash butter set a new record high. The 40-pound block Cheddar closed Friday, Sept. 5, at $2.35 per pound, up 2 cents on the week and 54 cents above a year ago. The 500-pound Cheddar barrels moved higher on Tuesday, Sept. 2, plunged 6.25 cents Wednesday, inched up a half-cent on Thursday and another 2 cents on Friday to close Sept. 5 at $2.3250 per pound, down 2 cents on the week but 52.5 cents above a year ago. Only four cars of barrel traded hands on the week. The lagging NDPSR-surveyed U.S. average block price hit $2.1618, up 6.9 cents, and the barrels averaged $2.2403, up 5.8 cents.

The state of the Midwest cheese industry is similar to the last week of August, according to Dairy Market News (DMN), notwithstanding the psychological dimension of having just completed the Labor Day Holiday weekend. Most cheese plants are near full production, and buyer demand is characterized as "hungry."

As expected, with most cheese production schedules already so full before the holiday, little changed during the weekend. Milk supplies to cheese plants remained on schedule to maintain planned cheese production. Strong orders are keeping plants busy. In some cases, plants with any ability to handle slightly increased cheese production are diverting milk from nonfat dry milk production as a strategy to produce more cheese.

Western cheese production is strong. Increased milk supplies are being directed to cheese to meet demand. Domestic demand is good with retail orders steady to strong and institutional food service demand increasing as schools return. Export sales have slowed as U.S. prices are above international prices. Cheese stocks are tight for barrels. Blocks supplies are adequate for current demand.

July 2014 milk production hit 16.4 billion pounds, according to USDA’s preliminary data, up 4 percent compared to a year ago. USDA’s latest Dairy Products report issued Thursday, Sept. 4, shows where it went. Following a rare revision in last month’s report, July butter production was pegged at 136 million pounds, down 3 percent from June but 2.6 percent above July 2013.

Nonfat dry milk output for human consumption totaled 166 million pounds, up 12.1 percent from June and 42.7 percent above a year ago.