Market Update
June 25, 2010
Dairy Market Update: Wholesale Prices Recover from Last Year's Lows
By Bob Yonkers, IDFA Chief Economist, Ph.D.
While dairy market prices have moved both up and down in the first half of 2010, wholesale dairy product prices on average clearly have recovered from the low levels seen last year. In fact, weekly prices so far in 2010, as published by the National Agricultural Statistics Service (NASS), have averaged above the five-year average seen prior to 2007; for some products, the prices are well above the earlier five-year average.
NASS block cheddar cheese prices through the week ending June 18 have averaged about $1.44, nearly 6 percent higher than the 2002-2006 five-year average. The average NASS butter price, about $1.46 this year, is more than 7 percent higher than the pre-2007 five-year average.
The average prices for dry dairy products are even higher compared to the historical averages. The NASS nonfat dry milk price average so far this year, $1.17, is 33 percent higher than the 2002-2006 average, and the NASS dry whey price of 37.7 cents is 56 percent higher.
It is important to remember that a major contributor to the low milk prices and very poor dairy farm profitability in 2009 was the global financial crisis. The International Monetary Fund forecasts world economic growth of 4.2 percent this year. That global growth is fueling a return to world dairy demand growth, which in turn has resulted in higher world dairy prices (see Figures 1-4).
U.S. exports of dairy products are nearly all higher this year than last, and imports overall are down. These changes are important to note, considering that exports accounted for 9.3 percent of all milk solids produced on U.S. dairy farms in 2009, according to U.S. Dairy Export Council estimates.
Looking ahead, the Organization for Economic Cooperation and Development based in Paris just released its 2020 forecasts for the global agricultural sector. OECD expects world dairy market prices to remain 15 percent to 40 percent higher in the coming decade (2011-2020) compared to the decade prior to the 2007/2008 peak in prices.
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