Sunday, October 4, 2009

September Prices Announced

September Class III milk and component prices were announced on October 2. The increase was primarily the result of the increase in support prices announced by Secretary Vilsack on July 31.

The Class III price for September was $12.11/cwt compared to $11.20 for August and $9.97 for July. While this is a welcome improvement, it is still far from the 2007/8 highs.

The increases are primarily the result of the higher support prices for cheese and nonfat dry milk. Unfortunately, these price supports are scheduled to expire at the end of October, and with the historically high inventories of cheese, there is little reason to believe that prices will not retreat to their former levels.

The chart below shows the transition of prices since January 1, 2000. Of particular interest is the butterfat price which has not been influenced by price supports and remains around the historical levels of $1.20/lb.

The protein price is primarily dependent on cheese prices. The U.S. and global supply of cheese has kept prices extremely low.

Although there are strong indicators of coming relief for the dairy industry (see September 21 post to this blog), these indicators must continue their trends in exchange rates (weaker USD) and reduced cow numbers before real recovery is reached . There is light at the end of the tunnel, but it is still dim.

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