Editor’s note: The following are available market reports and futures data as of October 19, 2007.

Butter

Price gyrations in the butter market continue. Current pricing levels in the upper $1.20’s are at the lowest point since February. The impact of exporting butter is not yet to a point where pricing is being affected. There are deals occurring that are moving butter. However, the volumes are not as heavy as the hype and not meeting the hope that the sales will strengthen butter prices and clear excess inventories.

Looking at the world situation, the potential remains for the U.S. to become a bigger exporter in the last quarter of 2007 and into 2008.

Retail and food service orders are increasing. There is talk of more featuring of butter around the holidays. Butter churning is moderate to heavy to process available cream supplies and meet current demand.

Cheese

The cheese market continues to bounce erratically. Current cash cheese prices at the Chicago Mercantile Exchange are sharply higher than October 2006 ($1.80s versus $1.20s), continuing to limit promotional activity. Orders are not as strong as normally expected for the early holiday season. Many packagers are able to fill orders without overtime. Aged cheddar supplies are showing more gaps than usual as buyers purchased supplies early since aged was often less expensive than current. Rebuilding aging programs is slow at current prices. Cheese production is seasonally active though manufacturers are wary about making uncommitted loads.

Fluid milk

Milk production is mostly steady. Balancing plants in California seem to be handling intakes more effectively. Plants in the Central and Eastern regions are operating well within capacities. Demand by bottlers is level in most Northern and Western regions, higher in Florida and the Southeast.

Cream is becoming more plentiful as component values rise seasonally. Multiples are steady to lower. Transportation of cream and other commodities between regions has become a little more difficult as equipment shortages in both the West and Central regions occur sporadically.

Production levels for cultured and aerated products, dips and holiday beverages are increasing. Cost and availability of feed for carrying herds through the winter continue to be a concern for dairy operations.

Some farms across the Northern tier of states are still harvesting corn, and recent wet conditions are slowing progress. Hay prices in most locations are reportedly firm and offerings on the light side.

Dry products

The nonfat dry milk market tone is guarded and prices are unchanged to slightly lower. Inventories are reportedly building at some manufacturer/reseller facilities and many sellers seem to be interested in keeping stocks current rather than building heavier inventory levels. Pricings are reportedly less aggressive than in the recent past.

Dry buttermilk markets are mixed. Central and Eastern prices are unchanged but West prices dropped markedly. Recent production levels in the West have been heavy and led to building inventories. Production in the Central and East regions is steady.

Whey protein concentrate (34 percent) prices are lower on a weaker market although various traders anticipate prices to solidify based on the protein values represented by steady NDM and whey prices. Inventory levels are mixed, ranging from balanced to heavy.

Edible dry whey markets are steadier while the feed grade market is showing some weakness. Demand for edible whey is reportedly increasing from both domestic and international buyers. Inventories are generally more in balance with current market demand and some sellers feel there is enough market strength to warrant moving toward multiple cents premiums.

Prices for lactose are unchanged to lower, and the market is weak.

September milk production (NASS)

Milk production in the 23 major states during September totaled 13.7 billion pounds, up 3.1 pecent from September 2006. Production per cow averaged 1,644 pounds, 31 pounds (1.9 percent) above September 2006. The number of cows on farms was 8.34 million head, 91,000 head (1.1 percent) more than September 2006 and 12,000 head more than August 2007.

September Federal Milk Order price and pool summary

During September, about 9.5 billion pounds of milk were received from producers. About 3.6 billion pounds of producer milk were used in Class I products, 6.2 percent lower than the previous year. Calendar composition likely had a negative impact on milk used in Class I in 2007 as compared to 2006. The all-market average class utilization percentages were: Class I = 38 percent, Class II = 12 percent, Class III = 41 percent and Class IV = 9 percent.  PD