U.S. butter stocks keep heading lower after falling below those of a year ago in August for the first time since June 2019. 

The Agriculture Department’s latest Cold Storage report shows the September 30 butter inventory at 330.1 million pounds, down 32.6 million pounds or 9% from the August level, which was revised 4.2 million pounds lower than what was reported a month ago. Stocks were down 13.8 million pounds or 4.0% below September 2020.

American type cheese stocks jumped to 844.1 million pounds, up 17 million pounds or 2.1% from August and were 71.5 million pounds or 9.3% above those a year ago. The August level was revised up 3.5 million pounds.

The “other” cheese category climbed to 592.2 million pounds, up 8.6 million pounds or 1.5% from August, and 31.5 million or 5.6% above a year ago.

The resulting total cheese inventory stood at 1.46 billion pounds, up 25.5 million pounds or 1.8% from August and 104.6 million or 7.7% above a year ago.

Butter stocks were 7 million pounds lower than StoneX forecast but they add the caveat; “Stocks last year were very heavy, so being down 4% still leaves butter stocks at adequate levels. With milk production expected to stay weak and cheese production expected to stay relatively strong we are going to continue to pull butter stocks down and that should be supportive for prices.” 

Cash dairy product prices at the Chicago Mercantile Exchange ended October with cheese heading lower and butter, powder, and whey climbing, as traders anticipated the next Global Dairy Trade auction on Nov. 2 and the September Dairy Products report on Nov. 4.

 Cheesemakers are busy according to Dairy Market News. “Plant managers report existing employees working overtime to fulfill needs is the strategy, and even then there are shifts not being staffed.” Cheese customers have also been very busy. Demand for all varieties is strong. 

Butter producers say cream remains tight, if not tighter. Production schedules are reportedly stunted, due primarily to plant employee and driver shortages. There have been recent improvements in hiring, but the timeframe for a more normal production situation is unpredictable, according to plant managers. As manufacturing geared for holiday retail order surges, bulk butter availability has declined and prices have done the opposite. Butter market tones are notably bullish, says DMN. Some believe this shift could be short-lived while others are “viewing 2022 through a different lens.” 

Cash Grade A nonfat dry milk closed the week at $1.5575 per pound, 2 cents higher on the week, highest since Aug. 7, 2014, 16 cents above their Oct. 1 posting, and 45 cents above a year ago. Sales for the week totaled 13 loads and 17 for the month, down from 69 in September.

CME dry whey closed Friday at 63 cents per pound, up 1.25 cents on the week, highest since May 26, up 5 cents on the month, and 23 cents above a year ago. There were 6 sales on the week and 16 for the month, up from 13 in September. Domestic and international whey demand is good.

On farm milk output is increasing in most areas of the country, according to the USDA’s weekly update, though there are reports that it’s slightly tight in areas of the Northeast. Milk output is up in parts of the West, although Pacific Northwest contacts relay that milk supplies are somewhat lighter. 

Bottling demand is mostly steady. Seasonal retail products, like eggnog and aerated cream, have increased production for customer demands. Cream markets are stable. Internal cream supplies are meeting the needs of end users. Cream prices have increased in the Central and Eastern region, says DMN.

It was a record third quarter for total dairy exports heading to China, says HGD, “due to WMP, fluid milk & cream, SMP and butter gains. Shipments to the Middle East were the strongest in three years in the quarter, driven by WMP and cheese.”

New Zealand is the Number 1 dairy exporter so the U.S. keeps a sharp eye on conditions “down under.” They and the European Union are our biggest competitors in the international marketplace, and this at a time when dairy exports contribute more to U.S. dairy farm bottom lines than ever before.

Australian milk production in September was weaker than expected, according to StoneX’s Dustin Winston, down 2.9% YoY. Fat and protein content were both down which left component adjusted production down 3.2%. Milk output for the ‘21/22 season is currently lagging 3.3%, says Winston.

Mexico is the U.S. biggest customer while Southeast Asia is a growing market. South Korea is a particularly large buyer of U.S. cheese. The Oct. 26 Daily Dairy Report stated; “South Korea remains in a dairy deficit and will continue to be a key cheese market for U.S. exporters going forward, according to a new USDA Global Agricultural Information Network (GAIN) report.”