US cheese inventories are finally showing signs of a return to "historical levels." According to MilkPrice blogger, John Geuss, this can almost certainly be attributed to an increase in exports, but the unavailability of export data as a result of the current US government shutdown means that this cannot be confirmed until later this month.
The Class III milk price, which is the pricing basis for half of the milk produced in the US, was up 1.3% for September versus August 2013.
The price is announced at the end of the month based on the wholesale prices of cheese, butter, and dry whey.
Although the US government is shut down, and the websites announcing the prices are closed, the pricing process continued as usual with the 2 October announcement of September milk and component prices.
The announced Class III price for September was $18.14 per hundredweight (cwt), with milk protein payment making up the majority of the price.
The Class III price for milk is the sum of the value of the components in the milk.
There is no payment or penalty for the water content of the milk.
NASS publishes prices for cheese blocks and barrels weekly and then publishes a weighted average every month on a four-week, four-week, and five-week schedule. The majority of the Class III price is dependent on the wholesale price of cheese as measured by the National Agricultural Statistical Survey (NASS).
The Class III milk price and the NASS cheese price are closely linked by the formulas that are used to calculate the Class III price.
The graph below shows graphically the correlation of this data. The tight correlation means that the Class III price can be predicted with 96% accuracy given the NASS cheese price.
There has been concern that the growing inventory of cheese in the US could depress prices.
However, the most recent data on inventories indicates that cheese inventories are returning to historical levels.
Cheese production has remained robust, so the reduced inventories of cheese almost certainly reflect increased exports. Export data lags in availability and cannot be confirmed until late in October.
If the US government shutdown continues, the data may be further delayed.
The month of September was positive in all respects.
Prices of cheese, butter, dry whey, milk protein, butterfat, other solids all increased from the prior month.
US-based John Geuss is the editor of dairy commodities blog, MilkPrice.
For a more in-depth examination of last month's US dairy commodity movements, visit MilkPrice.