What's happening in the dairy industry?

June has been a busy month with dairy products and strategies in the news. Consumers have seen milk prices increase by one dollar a gallon with increases in cheese, butter, and ice cream. The increase in milk prices in the store is partially related to higher milk prices in dairy farmers (represent half of the store shelf increase).

Dairy processors (such as Kraft, Deans, and Starbucks) are also feeling the impact of higher dairy input costs that are being passed along to consumers. But, independent and local processors are adding marketing pressure as their prices remain lower than national name-branded dairy products. Some pizza companies are adding a “topping” change for cheese and the amount added could decline.

Dairy farmers will receive record-high milk prices in July, 2007, receiving over $22 per one hundred pounds (cwt) for their milk (this represents an increase of 8 cents a pound compared to winter 2007 prices with a gallon of milk containing 8.6 pounds of milk). Milk production remains tight as more cows have been sold, heat stress is lower milk yield, and world demands for dairy products remain high.  Dairy managers face high hay prices (up 40% due to drought and the spring Easter freeze), higher fuel and energy costs, and high corn prices due to a lack of rain and continued growth in ethanol plant numbers.