Update on the Numbers

When the U.S. Dollar (USD) is weak, the demand for U.S. cheese is greater as the cheese is less expensive on the global markets. In late 2007 and early 2008, the USD was very weak and export demand for U.S. cheese hit new highs. Then the USD strengthened considerably and demand for U.S. cheese on the global market took a nose dive. Currently, the USD has weakened again but has not dipped to the very weak levels early 2008. Currently, the USD has leveled off at a mid level valuation.


In mid 2008, the New Zealand Dollar (NZD) was very strong, making New Zealand expensive on the global market. In late 2008 and early 2009, the NZD weakened significantly, increasing the demand for New Zealand cheese. It has now strengthened again and leveled off slightly below the 2008 highs. One could say that New Zealand cheese currently is "moderately expensive".

After reaching record highs in late 2007 and early 2008, cheese prices fell significantly in late 2008 and early 2009, partially as a result of the exchange rates mentioned above. They have now recovered somewhat, but based on the January, 2010 prices to date, they will probably level off near the current prices.

As a result, the spectacular Class III milk highs of late 2007 and 2008 fell to half that level in early 2009. They have now recovered near the mid point of that range and will probably stay there in the immediate future.

Corn prices have not returned to their long term $2.50/bushel levels, but they have come down from the extremes near $7.50 that occurred with the rapid expansion of the ethanol business. They appear to be settling in around $3.50/bushel.

Similarly, Soybean prices have not returned to the $5/bushel long term price level, but they have fallen from the $15 highs when soybean acreage was planted with corn during the ethanol expansion. The prices appear to be settling in around $10/bushel.

The number of cows has decreased and will continue to decrease, but will not hit the lows predicted only a few months ago by the USDA. There must be optimism in the dairy industry.

It would appear that the dairy market is stabilizing. There are no outrageous highs and no disastrous lows. What could be better for the dairy industry?

In the next post, we'll examine the advanced pricing model. What are the drivers for higher prices in that sector?