A combination of three factors: butter prices declining this week to levels last present during mid-July, cream offerings being heavy and expected to increase, and butterfat tests since July substantially above the last few years, all lead to one result - surplus cream

Milk supplies available for cheese manufacturing have increased and cheese plants are working additional hours to accommodate the increased volumes Midwest farm milk production is increasing steadily, and California milk production is slowly building.

Class I demand continues to be very strong in the Northeast and Mid-Atlantic regions, limiting manufacturing milk supplies. California milk output trends continue to indicate steady to slightly higher gains. Processing plants are running at manageable levels and no issues are expected over the Thanksgiving holiday period. Conditions have been ideal for milk production across Arizona and total output is increasing on a weekly basis. 

Total cheese output (excluding cottage cheese) was 871 million pounds, 0.3 percent above September 2011 but 1.9 percent below August 2012.

Cheese prices across the U.S. continued to move higher this week and milk production is increasing, to varying degrees, across most regions of the nation, reports the USDA's Dairy Market News.

Demand for mozzarella is good as new pizza promotions are surfacing. Cheddar sales are also good as processors are looking to secure additional product

Rabobank forecasts a reduction in the exportable surplus available from what it calls the “Big Seven” export regions (the EU, U.S., Australia, New Zealand, Brazil, Argentina, and Uruguay) in the closing months of 2012 and first half of 2013. That would be the first such reductions in more than four years.