Cheese prices have been under substantial pressure during the second half of September. The barrel cheese price reached a record high on September 11th and has now fallen 32.50 cents by September 27th with no loads traded on the spot market during the decline. Sellers wanted to sell loads but to no avail, as buyers were nowhere to be found.
This pattern has been seen numerous times as a buying or selling frenzy can occur with buyers or sellers leapfrogging over each other attempting to take care of business only to have the market move substantially outside of the fundamental level of where the market should be. This time a price void developed in the market as the price had increased rapidly due to aggressive buying. Once the buyers were satisfied no one was willing to purchase at the high price. The decline of block cheese was not as dramatic with the price falling 20.50 cents. There was trading activity in the spot market as the buyers of blocks were willing to purchase but at lower prices.
The butter price has fallen 39.75 cents over the past 2 weeks and 46.50 cents from the high of the year established on August 28th. The price has fallen to the lowest level since February 15th. We have seen larger declines over a short time nevertheless, the decline has been brutal. The August Cold Storage report provided a reason why the butter price has declined. Butter inventory totaled 323.3 million pounds. This was a decline of 29.6 million pounds from July, but inventory remained 11% above August 2023. Butter buyers have not seen the need to be aggressive as sufficient butter is available to meet both current demand and demand through the end of the year.
The market may be overdone to the downside and may retrace, but there is no indication as to what level buyers will be willing to support prices. One thing we may be certain of is the highs have been established for the year. The hope for a strong rest of the year has faded. Milk prices may remain higher than in the past few years but have fallen significantly over the past few weeks.
There has been an expectation that milk production would continue to remain below a year ago, but that may be shifting as milk output in August was better than expected with production only 0.1% below a year earlier. The tight heifer supply and high prices have resulted in less culling and more older cows retained in the herds. The idea had been that this could limit the potential for milk production to improve as older and lower-producing cows would limit the gain of milk production. However, the increase of 8 pounds per cow in August compared to a year ago was a surprise. Even though growth in milk production might be subdued to some extent, it appears growth will continue.
There have been some discussions taking place about the increase of breeding for a higher percentage of heifers from dairy cows and cutting back somewhat on breeding beef on dairy. Now may be the time to take a good look at this as the strong demand for beef cattle will run its cycle and beef on dairy calves may not be as lucrative as it has been. However, it has been very beneficial for farm income over the past few years and may continue for a while longer. But this is something to be thinking about.
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*I will be at the World Dairy Expo from October 1st through 4th. Please visit the AgMarket.Net booth 664 in the Trade Center. I will also be part of the panel for the live taping of the US. Farm Report in the Tanbark on Wednesday, October 2nd from 12:00 – 1:00 pm. On Thursday, October 3rd, I will be presenting at the 3:30 Knowledge Nook session on the topic, “Making the Most of Your Farm Income Potential”. I hope to see you there!
Robin Schmahl is a commodity broker with AgDairy, the dairy division of John Stewart & Associates Inc. (JSA). JSA is a full-service commodity brokerage firm based out of St. Joseph, MO. Robin’s office is located in Elkhart Lake, Wisconsin. Robin may be reached at 877-256-3253 or through the website www.agdairy.com.
