At a time when most dairy farmers are suffering low prices, Class III milk prices are a bright spot in the darkness. This month Class III milk prices, which are based on cheese prices, are the highest they’ve been since December 2014.
“[The high prices] come on the heels of a tight barrel cheese market in which buyers ran prices from the low prices this spring towards levels that historically trim buyer interest,” says Mike North of Commodity Risk Management. “In the wake of that, cheese and milk prices have fallen.”
Earlier this week, USDA released the WASDE report for September lowering Class III prices in response to the reduction in cheese prices. As cheese prices have declined, buyers will determine the direction of the market the remainder of the year, according to North.
“Most of the US domestic dairy consumption takes place in the 4th quarter of the year. As we move into that season, the actions of product buyers will determine price direction,” he says. “Strong purchasing at current values would be helpful in firming prices.”
North warns lower prices may need to come before strong purchasing takes place, meaning milk prices could decline before they level out.