The National Agricultural Statistics Service reported U.S. barrel prices over $2.12 per pound and blocks over $1.99 per pound during the week ending December 29th. USDA forecasts 2008 cheese prices to peak in the first quarter of the year and then decline to average $1.645 to $1.725 per pound, just below 2007’s average of $1.738, with higher expected milk production this year and relative product prices likely favoring increased cheese production. Cheese prices should remain relatively high by historical standards because cheese exports are expected to remain strong, stocks are moderate, and production is limited. Cheese exports climbed to over 2.5 percent of total production through October and are expected to remain strong in 2008 because of the weak dollar and because the economies in buying countries, many of whom are energy exporters, remain strong. December’s Cold Storage report places total cheese stocks at the end of November at 785,359 pounds, virtually unchanged from the same period in 2006, and 9 percent above the 5-year average for the end of November. The January Dairy Products report placed November production 1.2 percent behind that of a year earlier.
Butter prices have tumbled from their third-quarter highs to average $1.3012 per pound for the fourth quarter. The butter price in 2008 is expected to remain in the $1.195 to $1.305 per pound range for the year. Monthly butter production through November exceeded that of 2006 in most months, especially in the second half of the year, in some months by double digits. Stocks were a third higher at the end of November 2007 compared with a year earlier. Lower prices could buoy exports which have recently accelerated and help draw down stocks in 2008.
Exports of nonfat dry milk (NDM) and skim milk powder (SMP) declined in 2007 by nearly 13 percent from the 2006 level, and commercial stocks as of the end of November were 227 percent above the corresponding period in 2006. Exports had been down by larger percentages throughout most of 2007, but exports of NDM/SMP to Mexico in November totaled 9,891 tons, the largest since October 2005, and exports to that important market are now up for the year. As a result, it appears that stocks may be declining, and exports may be picking up.While prices have sharply declined from 2007 peaks, they should average $1.580 to $1.640 per pound for 2008. Similarly for whey, prices have fallen, but there appears to be support in the 40-cent-a-pound range. At that price, whey may price itself into other than food uses. The whey price is forecast at 43.0 to 46.0 cents a pound.
The softening in dairy product prices translates into lower prices for milk in all classes in 2008. The Class IV price is forecast at $16.80 to $17.70 per cwt, substantially below 2007’s average of $18.36 per cwt. The Class III price is expected to decline to $16.15 to $16.95 per cwt, down from 2007’s $18.04 per cwt average. The all milk price is forecast to average $17.90 to $18.70 per cwt, a drop from $19.15 in 2007.
Source: Livestock, Diary, and Poultry Outlook, USDA