Some call it a September surprise. Others call it fodder for the bears. The USDA’s latest Milk Production report showed preliminary output at 17.6 billion pounds, up 1.3% from September 2018. Output in the top 24 states totaled 16.8 billion, up 1.6%. Revisions added 10 million pounds to the original 50 state August total, now put at 18.29 billion pounds, up 0.2% from August 2018. Revisions added 32 million pounds to the top 24 states output.

Cow numbers continued to slip. The head count in the 50 states totaled 9.315 million, down 2,000 from August, which was revised lower by 1,000 cows, and 53,000 head below a year ago. Output per cow averaged 1,891 pounds, down 72 pounds from August but 34 pounds above a year ago.

California output was up 1.6%, thanks to a 35 pound gain per cow offsetting 5,000 fewer cows milked. Wisconsin was up 0.6%, on a 20 pound gain per cow. Cow numbers were down 6,000 from a year ago.

Virginia had the biggest loss, down 7.3% on 8,000 fewer cows, followed by Arizona, down 4.9% on 11,000 fewer cows. Texas showed the biggest increase, up 9.3%, thanks to 30,000 more cows and a 70 gain per cow.

The overall increase came on milk-per-cow gains, even when forage quality and quantity are questionable, says the University of Wisconsin’s Dr. Robert Cropp and Dr. Mark Stephenson in their monthly podcast. The two remain optimistic on milk prices and don’t see a major downfall in the near term, assuming there is not a collapse in cheese demand.

HighGround Dairy says “It is unlikely that U.S. milk output will see declines in the near term” and warned that “Production expansion has returned for good and will become the new normal yet again, ending the declines seen in three different months earlier this year and contributing to a return to global milk production expansion.”

Matt Gould, analyst and editor of the Dairy and Food Market Analyst newsletter, said the Milk Production report “represents the fastest growth rate in milk supply in about a year,” in the Oct. 28 Dairy Radio Now broadcast.

He warned that milk output is also growing in Europe “So we’re exiting a period where milk production was negative worldwide and entering, or maybe we’re already in, a period where milk production is positive.” That will put downward pressure on prices, though we are entering “the demand season of year,” but “volatility is probably the one thing you can predict will continue.”

He doesn’t see a freefall in prices and says “Next year’s lows are probably going to be the highest lows that we have seen in several years.” He also said it’s possible that prices may be even higher. “The big difference is we started this year with a mountain of milk powder in European inventories and now it’s all gone. We don’t have buffer stocks to insulate markets from volatility.”

Demand will also continue to play a big role. U.S. cheese at retail has been growing 2-3%, he concluded, “and we’re still growing per capita consumption.”

FC Stone stated in its Oct. 24 Early Morning Update: “In a broader view, a generally tighter milk production situation coupled with Class IV prices running above Class III early in the year (and, to some extent, California moving into the Federal Order) has tightened the availability of fresh cheddar (to say nothing of several production hiccups we’ve heard about in the past few months). This has partly led some users to whittle down, rather than building inventories for the holidays as they had last year.”

The September Milk Production report fed the bears. The September Cold Storage report likely added a little more fodder.

September butter stocks totaled 302.1 million pounds, down 2.2 million pounds or 0.7% from August but were 19.8 million or 7.0% above September 2018.

American cheese stocks totaled 771.4 million pounds, up 5.5 million pounds or 0.7% from August but were 32.3 million or 4.0% below a year ago.

Stocks in the “other” category climbed to 571.6 million pounds, up 2.1 million pounds or 0.4% from August but were up 26.5 million or 4.9% from a year ago.

The total cheese inventory crept up to 1.369 billion pounds, up 6.4 million pounds from August but 10.5 million pounds or 0.8% below September 2018.

Midwest cheesemakers continue to report a lack of spot milk, says Dairy Market News, but keep a close eye on how much to take on due to production capacity and potential resale concerns. Demand reports continue to be steady but slower than a few weeks ago and inventories in the region are “mostly in balance.”

Class I milk prices will move higher. The Agriculture Department announced the November Federal order Class I base price at $18.14 per hundredweight, up 30 cents from October, $2.62 above November 2018, and the highest Class I since January 2015. It equates to $1.56 per gallon, up from $1.33 a year ago. The 11 month average is $16.78, up from $14.82 a year ago and $16.41 in 2017.

The Oct. 17 Livestock, Dairy, and Poultry Outlook stated that, “based on recent data for milk cow numbers and dairy cow slaughter, milk cows for third quarter 2019 are expected to number 9.32 million head, 5,000 higher than forecast last month. Milk per cow for the third quarter is expected to be 5,805 pounds, an increase of 15 pounds from the last forecast.

Milk production for third quarter is thus expected at 54.1 billion pounds, up 200 million pounds than the last forecast. The fourth-quarter milk production forecast was unchanged at 53.8 billion pounds.

The 2019 forecast is 218.2 billion pounds. The forecast for the 2020 milking herd was unchanged from last month at 9.34 million head. Milk yield per cow was forecast at 23,725 pounds, an increase of 35 pounds from the last forecast, as more rapid yield growth in late 2019 should carry over into 2020. Due to the higher milk per cow forecast, the 2020 production forecast was raised 400 million pounds to 221.6 billion pounds.

U.S. dairy products continue to leave the country via the Cooperatives Working Together program. Member cooperatives accepted five offers of export assistance this week to facilitate sales of 965,625 pounds of Cheddar cheese and 180,779 pounds of cream cheese.

The product is going to customers in Asia and the Middle East from November through March 2020 and brings CWT’s 2019 sales to 44.4 million pounds of American-type and Swiss cheeses, 277,782 pounds of anhydrous milkfat, 4.5 million pounds of butter (82% milkfat), 5.3 million pounds of cream cheese and 43.5 million pounds of whole milk powder. The products are going to 27 countries and are the equivalent of 878.3 million pounds of milk on a milkfat basis.

Dairy Management Incorporated board members were in Mexico this week getting a first-hand look at dairy checkoff programs going on there, sponsored by the U.S. Dairy Export Council.

USDEC points out that Mexico is the U.S. No. 1 export market, accounting for one-quarter of U.S. dairy exports and that nearly 90% of Mexico’s dairy imports come from the U.S. Those sales amounted to $1.4 billion in 2018, says USDEC, and have increased for nine consecutive years. Exports to Southeast Asia were second, totaling about half those to Mexico, followed by Canada, China, South Korea, South America, and Japan.

HighGround Dairy reports that “EU milk production showed the strongest year over year growth since April, supported by higher production from the top five milk producing countries on the continent and especially good output from both Ireland and Poland.”

For the first time ever, a cheese from the United States has been judged “Best in the World” at the World Cheese Awards. A panel of 260 judges from 25 countries ranked Rogue Creamery’s Rogue River Blue No. 1 on Oct. 18 in Bergamo, Italy. There were 3,804 entries.

Rogue Creamery is located in Central Point, Oregon. The USDEC praised the award and what it means for U.S. cheese globally now that U.S. cheeses can be found in fine cheese shops and restaurants in Europe, the UK, Australia, Japan, and around the globe. Complete details are posted at the USDEC website.