Friday, October 30, 2009

October Prices Announced

October Class III milk and component prices were announced today. All prices are up significantly and showing positive trends of recovery from the last 11 months of extremely low prices. Protein, the most significant factor in the milk check recovered to $2.5584/lb., well under the $4.71 high of December 2007, but 50% above the low of $1.70 in July 2009.

Butterfat prices remained fairly constant at $1.27/lb.

As a result of these higher component prices, the Class III price advanced to $12.82/cwt, well below the December 2007 high of $20.60, but 38% above the February 2009 low of $9.31.

The National Agricultural Statistical Service (NASS) Survey of Cheese prices that is used to establish protein prices also showed nice improvement and a nice trend reaching $1.4110/lb. for the month of October.

The NASS cheese prices run about two weeks behind the Chicago Mercantile Exchange (CME) cheese prices which have advanced to levels near $1.50/lb. Because the NASS prices are based on a broad survey and the CME prices are based on only a few minutes of trades each day, the NASS prices generally follow the CME pricing but with a little less volatility. Hoard's Dairy provides a very nice graph which follows both prices. Based on the CME pricing, we can expect some lift in the NASS prices in the next few weeks which will influence the November prices.

Everything seems to be lining up for a nice recovery in dairy prices. However, before the final recovery can take place, the cheese inventories that have reached record highs will have to be reduced. This will delay a full recovery, but at least there is light at the end of the tunnel.

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