Dairy Analyst Sees Good News for Producers

July 3

Ken Bailey, Penn State University dairy economist says dairy commodity markets are showing signs of "real price strength after months of languishing at support levels." Hot and humid weather across much of the country has depressed milk production per cow, and that has improved the outlook for cheese prices, Bailey says.

"The good news about higher cheese prices is that it will increase the monthly average component values for protein, and that will improve milk prices," he says. "The bad news is that USDA found more butter. There was a large adjustment (more than 30%) in the Chicago Mercantile Exchange weekly reported warehouse butter stocks, and that lowered butter prices about 10-15 cents per pound.

Grade AA butter at the Chicago Mercantile Exchange was trading at $1.32 per pound on June 12. "In fact," Bailey notes, "four carloads were traded that day." After USDA released the adjusted stocks report, butter fell to a low of $1.1575 by June 23. It has since strengthened to $1.2325 by June 30.