Dairy prices down, but US market looking 'healthy' - Part two

By John Geuss

- Last updated on GMT

US dairy commodities blogger, John Geuss.
US dairy commodities blogger, John Geuss.

Related tags Milk

In part two of his December 2012 US dairy commodities breakdown, MilkPrice blogger John Geuss gives the latest on whey, cheese and butter prices, as well as the "positive" impact of the recent 'fiscal cliff' deal.
Image 1

The value of 'other solids' is based on the price of whey.  Whey is finding many good uses in food products and this has put pressure on inventories.  

To illustrate this, the chart to the left shows that inventories are currently at a six year low for this time of the year.

Image 2

This can be further illustrated by the trend during this same six year period.  Whey inventories have dropped consistently over this time.

Exports of dry whey also continue to show strength.  As discussed in my previous post​, dry whey disappearance is driven largely by exports.

Image 3

The exports continue to put pressure on inventories which results in higher prices.  So far the higher prices have not dampened the usage of whey.  At $0.66 per pound (lb) it is still a good value.


The lower price for cheese has had a direct impact on the price of milk protein.

Image 4

However, there is little to support the drop in cheese prices.  As shown in the graphs on the left and right of this page, the inventories of Natural and American Cheese are near 2009 levels.  This is in spite of the increases in cheese production, domestic consumption, and exports.

Image 5

As inventories are depleted, prices usually go up.  In the last two months. the opposite has happened.  While markets are only partially rational, the current price certainly does not seem rational.  

That would leave the conclusion that cheese prices will likely escalate or at least not drop further.


Butter appears to be reaching normal levels of inventory and therefore normal levels of pricing.  Domestic per capita consumption of butter remains stable as it has for years.

Image 6

The only growth is due to the U.S. population growth and export growth.  Inventories seem to be at reasonable levels, so there is little reason for price changes.

Butter prices will probably remain stable in the near future.

Expected changes

There is a positive environment in the near future for dairy prices.  

The new U.S. dairy farm bill was passed and the dairy fiscal cliff has been avoided.  Exchange rates remain positive and inventories of dairy products remain tight.  Class III futures remain in the $18 to $19 per hundredweight (cwt) range.  There should be very little pressure for further price reductions and a reasonable chance of higher prices.

You can see John's month-to-month US dairy commodity breakdowns at his blog, MilkPrice.

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