July 18, 2003
Farm Milk Prices Projected To Jump This Summer
Methuen, Mass. -- National dairy markets for cheese and butter have been on the upswing for the past several weeks, indicators which should mean higher milk prices this summer and fall for the region's dairy farm families. During the first week in July, wholesale cheese prices jumped a record $.24 per pound.
"If the higher market prices continue, that will certainly be good news for dairy farmers," says Robert Wellington, an economist for Agri-Mark, Inc., the leading Northeast dairy cooperative with 1,450 farmer-members. "This past spring, farm milk prices reached 25-year lows. After more than 18 months of prices far below the cost of production for Northeast farm families, we are finally seeing some price strength. Although this will not erase the long period of poor farm income, but it will it will certainly help."
Wellington says that farm prices may rise by as much as $3.00 over the next few months or about $.25 per gallon for dairy farmers. That's good news, he says, as farmers have been frustrated by low farm milk prices that have not been fully passed along to consumers. "Prices paid to dairy farmers in Vermont and other states are determined by national supply and demand conditions for milk, butter and cheese," he says. "When dairy markets are weak, so are farm milk prices. However, dairy markets are starting to strengthen, and we hope to see that trend continue."
Cheese prices have jumped in the past few weeks, including the record increase in early July. Prices are now about $.40 per pound higher than their low point this past spring. Butter prices have also improved, but to a lesser amount, up about $.20 per pound. These new higher prices should translate into higher milk prices each month with the full impact of $3.00 or more per hundredweight for dairy farmers for their September milk paid in October. If butter and cheese prices rise further, so will farm milk prices.
Both supply and demand are playing a role in the higher cheese prices, says Wellington. The recent statistics on U.S. milk production show a decline from a year ago. These are the first declines since 2001. Secondly, national retail cheese sales are reported to be surging, with a recent quarterly survey showing sales up 5 percent. Even food service sales, including fast food restaurant sales, are finally showing signs of improvement following a period of lackluster sales dating back to the events of September 11.
Ice cream sales have also strengthened as a result of the hot summer weather. Butter prices still lag behind the cheese price increase due to higher national inventories of butter built up during the past year, but reduced U.S. milk production should result in reduced butter production and perhaps even higher butter prices later this summer.
Wellington adds that Agri-Mark is a part of the national Cooperatives Working Together (CWT) program that should also help to stabilize farm prices at higher levels. Money raised from dairy farmers participating in the program will be used to reduce the size of the national milking herd, decrease overall milk production and subsidize the export of dairy products. "It is crucial for this program to enhance the recent increases in cheese and butter prices and further improve farm milk prices," says Wellington.
Agri-Mark is a farmer-owned cooperative that markets 300 million gallons of fresh milk each year for 1,450 dairy farm families in New England and New York, including 425 from Vermont. In addition to its manufacture and sale of its own Cabot and McCadam branded dairy products, Agri-Mark has invested in operations to manufacture and market valuable whey proteins and sells fluid milk from its farmers to the region's largest dairy processors.
Agri-Mark had 2002 sales of more than $550 million. Agri-Mark and its predecessor cooperatives have been marketing milk for dairy farm families since 1917, and also represents their legislative interests in the Northeast and in Washington, D.C. In addition to its manufacture and sale of its own Cabot and McCadam branded dairy products, Agri-Mark has invested in operations to manufacture and market valuable whey proteins and sells fluid milk from its farmers to the region's largest dairy processors.