In your September 25 issue . . .

BOTH STRONG DEMAND AND SHORT SUPPLIES have been driving butter values heading into the fall baking season, which is the time that typically posts the strongest sales. In July, there were 314.4 million pounds of butter in cold storage. That was off 5.4% from last year and was the lowest mid-year level since 2017, revealed USDA’s Cold Storage data.

STRONG BUTTER PRICES, near $3.15 per pound, have been propelling milk checks. The trend could continue for the foreseeable future as recent investment in processing capacity has focused largely on cheese. Overall, cheese output has climbed 2.7% in the first seven months of this year.

IN AUGUST, THE CLASS IV MILK PRICE topped the Class III level by $4.71 per hundredweight (cwt.), the largest premium Class IV has held since September 1998, reported the University of Missouri’s Scott Brown.

FOR THE FIRST EIGHT MONTHS OF THE YEAR, Class IV prices have averaged $2.29 per cwt. above Class III. Compare this with 2015 to 2021, when Class III prices averaged $1.47 per cwt. above Class IV.

AS A RESULT, FEDERAL ORDER COMPONENT PRICES posted the third straight record for butterfat from June to August. The latest price of $3.40 per pound of butterfat was 15 cents higher than the previous record from September 2014, according to federal order data.

U.S. BUTTER PRICES TOP those in both New Zealand and Europe. Overall, American butter was fetching a 70-cent premium when compared to the Kiwis. Those high prices have caused imports to flow to the U.S.

IT’S ALSO ONE REASON THAT CLASS IV futures have held strong on the CME, with both September and October contracts selling over $24 per cwt. compared to Class III, which hovered near $20.

WHILE MARKETS STILL PREDICT a strong Class IV on the CME for the next two months, those prices begin to slip with a November Class IV in the $23 range, followed by $22 figures for December through March. Subsequent prices traded under $21 per cwt. for the following months.

SINCE THE OPENING FORECAST of a $9 midpoint per kilogram of milk solids (kgMS) for 2022 to 2023 milk, New Zealand’s Fonterra Co-op lifted that forecast to a $9.50 midpoint one month later on June 22 and then dropped it to a $9.25 midpoint on August 25. Fonterra, the world’s largest dairy product exporter, handles over 90% of the country’s milk.

THAT FORECAST WOULD YIELD a $17.43 Class III milk price with a $19.05 figure for milk at average test, projected the University of Wisconsin’s Mark Stephenson. Fonterra’s forecast comes with a range of $16.01 to $18.84 for Class III and $17.51 to $20.60 for milk with average test on a U.S. scale. New Zealand milk prices can be an indicator for other countries.

U.S. DAIRY PRODUCT EXPORTS posted the fourth straight month of gains with volume up 5% compared to the same month last year. Overall, international sales remain on a record pace, having grown 3% this year.

DUE TO CONTINUED GROWTH in dairy exports, USDA revised its forecast for 2022 from $8.4 billion to $9.5 billion, largely on strong shipments to Mexico, South Korea, and Japan. High product prices this year also caused USDA to project lower sales in 2023 at $9 billion.

AT 44.5 BILLION POUNDS, FLUID MILK SALES FELL to a 66-year low. Even worse, last year’s one-year decline was the largest drop on record. After eight consecutive years of growth, whole milk fell, too.

THE NATION’S TOP 50 CO-OP LIST remained largely the same. The 50 largest co-ops handled 81.4% of the nation’s 226 billion pounds of milk last year, while the top 5 procured 49%. To learn more, see page 513.