Slightly higher milk and dairy product prices forecast by USDA

Unusually warm weather throughout much of the U.S. in mid-July has led USDA to reduce its estimated forecast for 2006 milk production, and to forecast slightly higher prices for milk and dairy products than previously. Milk production estimates were fractionally reduced in August to 181.3 billion pounds, down 740 million pounds from July estimates, according to the USDA Economic Research Service (ERS) report.
The effect of weather on milk production is combining with seasonal factors to reduce the amount of milk available for manufacturing purposes. During August, the Southeast began to import milk from surrounding regions to offset seasonal declines in local production. Additionally, handlers are now filling the pipeline for the start of the school year.
Cheese prices, on a gradual decline all year, have stabilized and shown some strength in recent weeks in response to the hot weather. The cheese price should recover in the fourth quarter, predicts ERS. The butter price inched upward in the last week of July and sales have increased through the end of the month. There are indications that butter stocks are being drawn down. The butter price should continue to strengthen for the remainder of 2006 and will likely average $1.21 to $1.25 per pound for the year, predicts ERS.