Class III Milk Prices Expected to Reach Record High This Year

International and domestic market prices for most dairy products, especially Class III milk, remain strong, according to the U.S. Department of Agriculture's (USDA) Agricultural Marketing Service (AMS). The Class III milk price for 2007 is expected to hit a record average of about $17.50, far exceeding the previous record average price of $15.39 set in 2004.

The anticipated record price for the year is based on the actual Class III prices announced so far this year by USDA and the Chicago Mercantile Exchange (CME) futures contracts for Class III milk for the remaining months of 2007. The CME futures market is predicting that the average Class III milk price for 2008 also will exceed the 2004 record, reaching an average of about $15.75.

Butter prices in Europe have also been climbing, averaging $2.67 per pound for the two weeks ending September 13, while butter prices out of Oceania have leveled off at an average of $1.65 per pound. In the United States, the CME wholesale price of butter was much lower, closing at $1.37 on September 21.

Internationally, cheddar cheese prices out of Oceania are still rising, too, with recent AMS reports showing an average price of $2.18 per pound. After increasing about 30 cents per pound beginning August 1, cheddar cheese prices at the CME have been volatile, moving sharply lower and higher and then lower again during the week and a half ending September 21; the wholesale price that day settled at $1.8150 per pound for 40-lb blocks.

Skim milk powder prices in Europe increased slightly in the most recent AMS report to an average of $2.37 per pound, while the Oceania price was down about five cents on average to $2.25 per pound. AMS reports that the domestic wholesale price of nonfat dry milk in the central and western states averaged $2.05 and $2.04, respectively, for the week ending September 20.

The only product experiencing waning demand and lower prices is dry whey, according to AMS. Dry whey prices in both the central and western states are well off their peak of nearly 80 cents per pound in early April; last week they averaged 42.25 cents and 40.5 cents, respectively. Internationally, the price of dry whey has also declined in recent months; AMS reports the average price in Europe was about 61 cents per pound in the two weeks ending September 13.

Posted September 24, 2007