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Butter, cheese prices moderate

Butter, cheese prices moderate
Dairy prices decline as holiday orders are filled

What goes up must come down, or so it seems when it comes to the price for butter. Butter started October at $2.70 per pound, after setting a record on Sept. 25 at $3.14 per pound. It dropped to $2.35 by mid-October and is now $2.44 per pound.

Milk prices for October declined just slightly. The Class III price was $15.82 in September and is $15.60 for October, the result of slightly lower cheese and dry whey prices. According to Bob Cropp, University of Wisconsin dairy economist, the October Class IV price will be higher near $16.40 compared to $15.08 in September the result of butter prices holding up and higher nonfat dry milk prices.

Butter, cheese prices moderate

"Sales of butter and cheese remain good holding up prices, but exports continue to decline," Cropp says. Butter exports were down 35%, cheese was down 28%, nonfat dry milk/skim milk powder declined 5% and total whey products were down 18%, according to Cropp.

During October, the 40-pound cheddar cheese price was a high of $1.80 per pound in early October before dipping to $1.625. Cheddar barrels were a high of $1.73 per pound in early October, and by the end of the month were $1.58. Nonfat dry milk started the month at a high of $1.06 per pound, but has declined since to $0.86.

But Cropp says the decline is normal for this time of year.

"As holiday orders are filled we can expect butter and cheese prices to decline. While butter production has been lower than a year ago, 1.2% lower in August and 1.7% lower year-to-date, Aug. 31 stocks were 21.1% higher than a year ago and 9.1% higher than the five-year average for this date," he says. "Aug. 31 stocks took a big down turn from July 31, dropping 18%, the result of lower production and strong butter sales."

Cheese production remains strong with August production of cheddar cheese 3.1% higher than a year ago and 2.6% higher year-to-date. Total cheese production was 3.5% higher than a year ago in August and 2.5% higher year-to-date, according to Cropp. Unlike butter, stocks have been increasing with Aug. 31 stocks of American cheese up 15.5% from July 31 and they were 9.3% higher than a year ago. Total cheese stocks on Aug. 31 increased 4.7% from July 31t and were 12.1% higher than a year ago. August production of nonfat dry milk was 6.7% higher than a year ago and 8.4% higher year-to-date.

"With the filling of holiday orders we can expect both butter and cheese prices to fall lower, bringing down both the Class III and Class IV price," Cropp notes. The Class III price could be about $15.45 by December and the Class IV price about $14.50.

Cropp is expecting further price declines the first half of 2016. How low prices may end up will depend heavily upon the level of milk production and domestic sales because much improvement in exports is not likely until the last half of 2016.

The increase in milk production is slowing. September production was just 0.4% higher than a year ago.

"Of course a year ago, production was increasing strong being 4.3% higher than the year before," Cropp says.

September milk cow numbers declined 5,000 head from August and were just 0.4% higher than a year ago. Milk per cow was up only slightly at 0.1%. Total milk production year-to-date is 1.4% higher than a year ago. USDA has forecasted milk production for the year to be 1.4% higher than 2014. But, if the growth in milk production for the last three months of the year continues at this relatively small increase, total production for the year may only be up about 1.2% above 2014, Cropp says.

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