Market Talk with Bill Brooks

The cash dairy markets are pretty calm right now. Downes-O’Neill Dairy economist Bill Brooks told DairyLine that the block cheese activity last week may have been from the excess production over the Labor Day holiday.

“There’s good demand for product, but not enough to push the prices higher,” he said. “As we go forward, we’ll see a little bit more milk and more milk components, and that may start our seasonal decline at some point and time in the cheese market.”

Butter has gone 12 straight sessions without having a bid left on the board. Instead of bids and a little bit of trading, we are now starting to see offers. Brooks said that’s understandable given the current price level. “Demand might pull back away from the marketplace when you get up over $2.20.”

The August milk production report came in at 2.8 percent, which is a little stronger than Brooks anticipated. “It’s always hard whenever we have the kind of weather we had across a large part of the country there in July and August to know how exactly that’s going to impact milk production,” he said.

The surprise, according to Brooks, is how we arrived at that 2.8 percent. There was a bit of decline in cow numbers in August, but many were looking for an increase in cow numbers and milk per cow to drop more than what it did. “There was a stronger than average decline in milk per cow during August, but it wasn’t enough to really knock back milk production as much as we were anticipating, he said.

Milk production levels may stay the same for the next few months as production levels compared to last year were down. In fact, August of 2009 was the first month that we went into the red relative to 2008. Milk Production levels were below the previous levels through January of this year.

“We are going to continue to compare ourselves weaker production the previous year, so 2 1/2 to 3 percent is probably not going to be out of the realm of possibilities through the end of this year,” Brooks concluded.