By LEE MIELKE
Mielke Market Weekly 

U.S. dairy farmers got the message. The record high milk prices and low feed costs signaled them to, pardon the pun, "milk ’em for all they’re worth." They added cows and got more out of every one.

Preliminary data in the USDA’s latest Milk Production report show September output in the 23 top-producing states at 15.49 billion pounds, up 4.1 percent from August 2013 and the ninth consecutive month output was above a year ago. The 50-state total, at 16.47 billion pounds, was up 4.0 percent from a year ago. Revisions reduced the original August 23-State estimate by 3 million pounds, now put at 16.2 billion pounds, up 2.6 percent from a year ago.

August cow numbers in the 23 states, at 8.59 million head, were up 4,000 head from August and 78,000 more than a year ago. The 50-State count, at 9.27 million head, is up 2,000 from July and 59,000 more than a year ago.

August output per cow in the 23 states averaged 1,804 pounds, up 56 pounds from September 2013, the highest production per cow for the month of September since the 23 State series began in 2003.

California produced 3.29 million pounds, up a whopping 2.9 percent from a year ago, thanks to a 55 pound gain per cow, though cow numbers were down 2,000 head. Wisconsin, at 2.29 million pounds, was up 3.2 percent, on a 60 pound gain per cow, though cow numbers were also off 2,000.

Idaho was up 3.4 percent on a 40 pound gain per cow and 7,000 more cows. New York was up a hefty 4.5 percent, thanks to a 65 pound gain per cow and 5,000 more cows. Pennsylvania was up 3.5 percent on a 60 pound gain per cow, but cow numbers were down 2,000. Minnesota was up 1.5 percent, despite a loss of 3,000 cows, but output per cow was up 35 pounds.

The biggest increase award went to Colorado, up 10.8 percent, followed by Texas where they do things BIG, up 9.6 percent, on 30,000 more cows and a 45 pound gain per cow. Kansas was next, up 9.2 percent. Illinois was the only state in the top 23 showing a loss, down 0.7 percent.

Arizona was up 6.5 percent thanks to a 60 pound gain per cow and 5,000 more cows. Michigan was up 6.9 percent, also on a 60 pound gain per cow and 14,000 more cows than a year ago. New Mexico was up 3.4 percent, on a 60 pound gain per cow and 1,000 more cows. Washington state registered a 5.5 percent gain, thanks to a 50 pound gain per cow and 7,000 more cows.

HighGround Dairy’s Eric Meyer, in his analysis of the Milk Production report, predicts continued output above a year ago. He points out that September showed the largest annual growth in a single month since March 2012.

His initial call was that the report was "neutral since it met expectations, but since we believe this is the start of a number of 4 percent plus expansion months, it likely has bearish overtones to the U.S. spot and futures markets in the near future." He explains that two key bearish factors have taken control of the U.S. milk production engine: cheaper/higher quality feed and favorable weather throughout most of the country. This has led to exceptional growth in production per cow over the past few months and is expected to continue in the coming months. He believes the conditions are ripe for VERY strong U.S. milk production through the remainder of the year. To read the complete report, write Eric at ericm@highgroundtrading.com

Meanwhile, dairy cow culling increased some in September, according to USDA’s latest Livestock Slaughter report, but the high milk prices and low feed prices kept the numbers well below a year ago. An estimated 238,000 dairy cows were slaughtered under Federal inspection, up 9,000 head from August but 21,000 below September 2013.

Looking at the first nine months of 2014, USDA estimates that 2.09 million head were "retired" from the dairy business, 253,000 head less or 12 percent below the same period a year ago.

The bearish Milk Production report was offset a bit by a somewhat bullish Cold Storage report. September butter stocks totaled 146.1 million pounds on Sept. 30, down 18.9 million pounds or 11 percent from August and 86.9 million pounds or 37 percent below September 2013, according to preliminary data issued Wednesday.

American type cheese, at 631.3 million pounds, was down 16.6 million pounds or 3 percent from August and 29.8 million or 5 percent below a year ago. However, revisions reduced the original August inventory number by 14.5 million pounds.

Total cheese stocks on Sept. 30 stood at 1.0 billion pounds, down 27.3 million pounds or 3 percent from August and 57.4 million pounds or 5 percent below a year ago.

The bears won and cash cheese butter prices plunged the week of Oct. 20. The block Cheddar ended two weeks of "recovery," closing Friday, Oct. 24, at $2.14 per pound, down 14.75 cents on the week but 26.5 cents above a year ago. The Cheddar barrels saw a fifth week of decline, finishing at $1.9225, also down 14.75 cents on the week, 10.25 cents above a year ago, but a much larger than normal 21.75 cents below the blocks, a spread that normally ranges 3 to 5 cents.

This is the first time since July 31, 2014, that the barrels are below $2 per pound.

The blocks have plunged 31 cents from their recent record high and barrels have lost 56.75 cents. Generally, a penny movement on cheese equates to about a dime on the milk price. Only two cars of block traded hands on the week and 15 of the once-tight barrel. The NDPSR-surveyed U.S. average block price fell to $2.2638, down 7.9 cents, while the barrels averaged $2.2149, down 11.5 cents.