The Agriculture Department announced the September Federal order Class III benchmark at $18.31 per hundredweight, up 71 cents from August, $2.22 above September 2018, and the highest it has been since November 2014. It compares to California’s September 2018 4b cheese milk price of $15.62 and equates to $1.51 per gallon, up from $1.38 a year ago.

The nine month Class III average stands at $16.11, up from $14.62 at this time a year ago and compares to $16.12 in 2017.

The Oct. 4 Class III futures settlements portended an October price at $18.31; November, $18.04; and December at $17.37, which would result in a 2019 average of $16.56, up from $14.61 in 2018 and $16.17 in 2017. The peak in 2020 was $17.43 in September.

The September Class IV price is $16.35, down 39 cents from August and the lowest since May, but is $1.54 above a year ago. Its 2019 average stands at $16.21, up from $13.95 a year ago and $15.51 in 2017.

U.S. cheese prices have been on a roller coaster. The Cheddar blocks shot up to $2.2375 per pound on Sept. 16, highest price since Oct. 22, 2014, then plummeted, waivered some, and closed the first Friday of October at $1.9925, 34 1/4-cents above a year ago. The barrels hit a high of $1.94 on Sept. 16 but closed Oct. 4 at $1.79, 42 1/4-cents above a year ago.

Tight milk supplies in Midwest cheese producing country has affected cheese output and strong domestic demand has added to the pressure, resulting in higher milk prices.

Dairy Market News reports that milk offers are few and far between in the Midwest and spot milk prices ranged from Class to $1.50 over. Cheese demand reports were more positive and some expect demand to remain strong the rest of the year and into 2020. Cheese production is slower due to scanter milk supplies.

Western contacts report that current price trends are taking U.S cheese out of the loop when it comes to international sales. Others suggest that export demand has improved. Block cheese inventories were reported as well-adjusted, whereas barrel cheese supplies are substantial.

Butter closed the first week of October at $2.1850 per pound, up 3 3/4-cents but 10 1/2-cents below a year ago.

There is plenty of butter available and the strong U.S. price has attracted imports. Central butter manufacturing is steady, DMN said. Cream remains available and in a comfortable price range for butter plants. Inventories are reportedly in balance and will meet the increase in ordering expected near term. But, contacts do not expect cream to remain at current availability for long. Cream cheese production is expected to dip into the cream pool. Butter markets are steady, edging on bearish, but some contacts foresee continued price drops. Recent storage and market reports did not dampen the market tone as much as some expected, according to DMN.

Western contacts suggest the butter market has a “downside feel.” “Even now, when market activity is usually at its annual peak, demand is less than hoped for,” DMN said. Buyers have filled some of their required purchases, according to contacts, but can wait for deals to finish off fourth quarter needs. Cream is readily available and butter inventories, while being drawn down seasonally, are larger than preferred.

FC Stone warned in its Oct. 1 Early Morning Update; “The likelihood of seeing sub-$2 butter prices by the end of fourth quarter is growing. Strong production and strong imports have resulted in larger than expected butter stocks that look like they are going to drag CME prices lower.”

Spot Grade A nonfat dry milk closed Oct. 4 at $1.1450 per pound, highest CME price since March 2, 2015, 28 1/2-cents above a year ago.

Weaker butter prices are being offset by firming nonfat dry milk prices, according to FC Stone, which are leaving Class IV prices in a holding pattern for now. “U.S. powder continues to find underpinning support principally in global demand that seems to be improving by the week lately.”

CME dry whey closed Oct. 4 at 32 3/4-cents per pound, down 2 cents and 23 1/2-cents below a year ago, with a whopping 80 cars sold on the week.

The whey market is heavily influenced by African swine fever which has devastated the world’s largest hog herd, namely China. Whey is a vital feed nutrient for pigs and the U.S. supplies a fair amount. It’s also one of the imports that China has removed its tariffs from in its trade spat with the U.S., as it attempts to rebuild its hog herd.

Meanwhile; finances on U.S. dairy farms continue to improve. A higher All Milk price and lower feed prices nudged the August milk feed price ratio higher for the second month in a row. The latest Ag Prices report put the ratio at 2.26, up from 2.16 in July and compares to 2.06 in August 2018.

The U.S. All-Milk price averaged $18.90 per hundredweight (cwt.), up 20 cents from July and $2.80 above August 2018.

The national average corn price averaged $3.93 per bushel, down 23 cents from July but 57 cents per bushel higher than August 2018. Soybeans averaged $8.22 per bushel, down 16 cents from July and 37 cents below a year ago. Alfalfa hay averaged $179 per ton, down $4 from July but $2 per ton above a year ago.

The August cull price for beef and dairy cows combined averaged $68.30 per cwt., up $1.30 from July, $5.30 above August 2018, but $3.30 below the 2011 base average of $71.60 per cwt.

Agriculture Secretary Sonny Purdue kicked off World Dairy Expo in Madison, telling dairy farmers they will have to adapt to survive. He said “It’s very difficult in the economy of scale, capital needs, all of the environmental regulations and everything else to survive milking 40, 50, 60 or even 100 cows.”

HighGround Dairy’s Lucas Fuess reported in the Oct. 7 Dairy Radio Now broadcast that it was difficult to hear that sentiment but it is reality and “a wakeup call to make sure farmers are doing everything they can to keep costs down and continue to be competitive.”

He said the sentiment was better at expo this year, due to the rise in milk prices, and says HighGround has a good outlook the next few months which “hopefully will save some of the struggling dairies.” He said it was interesting to compare the secretary’s comments to some of the programs contained in the farm bill as HighGround believes smaller dairies can benefit greatly from some of them such as the Dairy Revenue Protection and newly named Margin Insurance programs. ❖