Report for October

Milk prices continued to strengthen in August, but production is showing signs of acceleration. This year’s slow decline in the rate of U.S. milk production growth was interrupted in July and August, bouncing back to a 2 percent year-over-year increase. Lower feed costs in August helped further improve the month financially for the nation’s dairy farmers, as did a drop in the recent rates of American-type cheese production growth. But dairy markets remain mired in a rather ho-hum mode, with low prices for nonfat dry milk, further weakness in dry whey prices, middling cheese prices that are struggling to find a sense of direction, and even some softness in typically strong butter prices as the industry heads into the holiday season. Cheese inventory levels remain a key factor in the dairy situation. As the U.S. Department of Agriculture’s (USDA) Dairy Market News recently commented, “large and aging cheese stocks continue to be the thorn in the side of the bull.”