Dairy markets have been moving in opposite directions for much of the past month. For example, the block cheese price rose steadily from $1.72/lb. to $2.00, before dropping sharply Friday the 18th to $1.83. In contrast, butter started November at $1.88/lb., but had fallen steadily to $1.65 on the 18th. Of course this meant that Class III and Class IV price spent much of the month going in opposite directions, before cheese prices collapsed suddenly. Non-fat dry milk fell by 5.25 cts/lb. since last month, while whey prices rose by 1.75 cts/lb. to $62.25 cents.
The October Pennsylvania all-milk price was $1.50 lower than September at $22.30. The Class III price fell by $1.04 to $18.03/cwt. The Class III futures prices average $18.68/cwt. for the rest of 2011. The Class IV price fell by $1.12 to $18.41/cwt. The Class IV futures prices average $17.70/cwt. for the rest of 2011. Together these values imply a Pennsylvania all-milk price for the rest of 2011 of $21.31, or $1 less than in October. For all of 2011, the average price is $22.04, $3.76 above the 2010 average. The forecast all-milk prices for the first eight months of 2012, based on the futures prices, are also shown in Table 1. These prices imply a PA all-milk price of $19.95/cwt. for the first eight months of 2012, an increase from last month. The forecast all-milk price for this period is $2.03/cwt. less than the 2011 average for the same months. If feed costs remain high, margins will be squeezed in 2012. Most northeastern dairy farmers will have to buy feed in 2012 to replace their crops lost to weather in 2011, and will pay high prices. Some products, especially corn silage, are very short, while some, especially alfalfa hay, are of poor quality.
The U.S. dollar has been strong in recent weeks, as the European situation remains murky. The New Zealand dollar in particular fell, dropping 4.6% against the American dollar since last month and 8.9% in the past three months. Europe continues to have its challenges, with changes in government in Greece and Italy in response to their debt crises, and considerable uncertainty about what will happens. The average citizen in both countries does not support reduced government expenditures or higher taxes, but the situation in both countries, and several others, seems to leave little choice. On the home front, the economic news is slightly better than last month. The stronger dollar and greater milk production in Australia and New Zealand do not bode well for American dairy exports.