Editor’s note: The following are available market reports and futures data as of November 14, 2008.

Butter
The Chicago Mercantile Exchange (CME) Group cash butter market held steady at $1.6350. Many traders are wondering when print butter orders for the holiday will be filled and prices may decline. Butter demand is unsettled. Retail feature activity on both private label and branded products continues to move butter seasonally. Food service accounts have been ordering for the holiday season. Supplies are generally tightest on salted product. Some frozen bulk loads continue to be tempered to bolster fresh butter supplies for printing.

Cheese
Cheese prices generally moved higher at the CME Group cash cheese market. However, an unsettled to weak undertone continues as many producers and buyers anticipate prices may decline after holiday orders have been filled. Made-to-order specialty varieties that need extra aging before cutting, such as Pepper Jack and Colby-Jack, must be made soon to be available for sale before the year-end holidays. Aged cheddar movement remains solid for all but the product stored at the highest CME prices. Mozzarella interest is steady to occasionally slower, depending on customer. Cheese production is steady to higher seasonally with most operations offered additional milk both now and for the upcoming holiday periods. According to Foreign Agriculture Service (FAS) data, U.S. total cheese and curd exports during September totaled 23.6 million pounds, up nearly 6 million pounds (34 percent) from September 2007. Total exports for the first 9 months of 2008 total 229.8 million pounds, up 74.2 million pounds (48 percent) from the same period in 2007.

Fluid milk
Overall milk production is following seasonal trends, with annual high component values in the Northern tier and Southern tier states starting to see increases in milk volumes. Recent rainstorms in the Northwest are expected to cause flooding and transportation issues in that area, but the full impact on milk production and processing is unknown at this time.

Use of milk in cheese-making is somewhat lower due to reasons ranging from plant maintenance to unfavorable market conditions for production of uncommitted cheese. Many dairy farmers are trying to lock in business plans for the next operating cycle, and finding that securing the usual operating lines of credit from their lenders is more difficult. Some lenders are scaling back the upper limits on lines of credit, which may make preseason purchasing of seed, feed and fertilizer trickier, and leave little or no safety net of funds for farmers. Cream markets are unsettled as spot cream loads carry fairly high multiples for churning purposes. Some cream, though, is heading into soft products related to near-term holiday needs.

Dry products
The dry products market is weaker in general as various products priced off of milk protein values continue to undergo pressure from a sell-off of nonfat dry milk (NDM) inventories into the government support program. Production is steady to higher in the West as milk is steady to higher and fluid demand is lower. Central/East production is also higher as shipments of milk outside those regions to fill fluid demand are tapering sharply. Dry buttermilk prices moved lower, following the NDM price trend. Inventories are variable both regionally and from manufacturer to manufacturer and range from sold-out to long, which is prompting some aggressive pricing to help clear holdings. With churns not necessarily seeking out additional spot loads of cream, buttermilk production is steady. Some condensed buttermilk is moving to Class II production for holiday specialty products. Dry whey markets are mixed, with a steadier trend in the Central/Northeast markets, and weaker tones in the West. Production is steady.

Some manufacturers are declining offerings of liquid or condensed whey to stave off further inventory increases. Inventories vary from region to region. Prices on lactose are mixed, but offerings to the market continue to show holdings at producer levels are prompting some manufacturers to offer discount prices. Buyers are not feeling pressured to lock in significant volumes at this time, as price offerings indicate ample inventories from which to draw. Whey protein concentrate (WPC) 34 percent prices are marginally higher as supplies tightened. Prospective buyers report obtaining adequate WPC 34 percent is becoming more challenging, and some shipping delays are occurring. Reports are circulating of some manufacturers considering revamping whey stream products, which could affect national production of lactose, dry whey and WPC 34 percent.

November supply and demand estimates (WAOB)
Milk production forecasts for 2008 and 2009 are increased slightly from last month. Cow number forecasts are unchanged from last month. Forecast 2008 milk per cow is raised from last month due to higher-than-expected August and September estimates. Lower-than-expected feed prices in 2009 should support slightly higher growth in milk per cow although gains are expected to remain below historical rates of increase. Weaker international markets will boost domestic supplies. Skim solids stocks for 2009 are reduced as domestic use of skims is forecast higher albeit at lower prices. Class III and Class IV prices for 2008 and 2009 are reduced from last month as most product price forecasts are lowered. Weak international demand and relatively large supplies of NDM are expected to result in sharply lower forecast NDM prices. Although relatively weak expected demand could pressure butter prices, relatively higher values of Class III products versus Class IV products may encourage milk to flow to cheese production, tightening butter supplies and supporting prices. Cheese prices are lowered reflecting larger-than-expected supplies of cheese. Whey prices are forecast lower than last month on weaker demand. The all-milk price is forecast lower this month, averaging $18.30 to $18.40 in 2008 and $15.30 to $16.20 in 2009.

September fluid milk sales (AMS & CDFA)
During September, about 4.65 billion pounds of packaged fluid milk products is estimated to have been sold in the U.S. This was 4 percent higher than September 2007. After adjusting for calendar composition, sales in September 2008 were 0.3 percent higher than September 2007. On an individual product basis, after adjusting for calendar composition, sales of organic whole milk, reduced fat milk (2 percent), low-fat milk (1 percent), flavored fat-reduced milk and organic fat-reduced milk increased from September 2007, while sales of whole milk, flavored whole milk, fat-free (skim) milk and buttermilk decreased from a year earlier.  PD