Dairy Market Update: U.S., World Markets for Dairy Products Remain Strong

Prices for wholesale dairy products continue to move up in both U.S. and international markets, while milk production growth in the United States continues to lag behind demand growth. At the Chicago Mercantile Exchange (CME) last week, the cash market price for cheddar cheese in 40-pound blocks was $1.5500 per pound, up 6.75 cents from the close of the previous week. Grade AA butter increased 1.75 cents last week at the CME to close at $1.4075 per pound.

Meanwhile, the U.S. Department of Agriculture's (USDA) Agricultural Marketing Service (AMS) reported that the midpoint of the range for nonfat dry milk sold in the Central states last week averaged over $1.70 per pound, up 4.9 cents from the prior week. Only the price of dry whey in the Central States showed a decline, losing 3 cents to average $0.7525 per pound last week.

International market prices also showed continued strength, according to data published by AMS for the two-week period ending April 26. The price for skim milk powder in Western Europe increased more than 11 cents per pound over the prior two-week period to $2.0752 per pound (midpoint of range); in Oceania, prices were up even more, climbing 13.6 cents per pound to an average of $1.8544 (midpoint of range). The price for dry whey in Western Europe increased 3.4 cents per pound to average just shy of 85 cents per pound (midpoint of range).

The price increases coincide with reports that milk production growth in the United States continues to lag behind demand growth. AMS reported that commercial disappearance of milk in all dairy products for the three months ending in February increased 2.8% above the same period last year. Meanwhile, U.S. farm milk production only increased 1% in the first quarter of 2007, according to USDA's National Agricultural Statistics Service (NASS).

Posted April 30, 2007