Iowa dairy producers are entering September with a mixed set of market signals, according to the latest U.S. Department of Agriculture Dairy Market News report. While stronger prices for nonfat dry milk and dry whey are providing some support, declining cheese and butter prices and generally ample milk supplies could limit near-term improvement in producer margins.
For the week of Aug. 31 through Sept. 4, the CME weekly average price for 40-pound blocks of cheese fell 3.35 cents to $1.4750 per pound, while barrel cheese averaged $1.5390, down 3.4 cents. Butter averaged $1.4260 per pound, down 3.65 cents. In contrast, nonfat dry milk increased 5.55 cents to $1.8820, while dry whey rose 2.35 cents to 74.4 cents per pound.
For Iowa producers, the cheese market is particularly important because Class III milk is primarily used to manufacture cheese and related products. USDA reported the August Class III milk price at $16.64 per hundredweight, up $1.12 from July. That improvement provides some relief, but the latest weekly cheese prices suggest producers should not assume that stronger Class III values will continue without volatility.
Milk availability is another key factor. USDA reported that milk supplies are expanding in the Central region, with spot milk available at prices ranging from flat Class to $4.00 over. Hauling constraints from rising diesel prices were also reported. For Iowa farms, that combination points to a market in which processors have access to milk, but transportation and plant capacity can influence where that milk moves and what it is worth.
Source : iastate.edu