The dairy markets may be recovering faster than the government or the industry itself thinks.
Butter, cheese and milk powder prices in the United States are on a major roll, and although butter and cheese prices remain under year ago, they have halved the difference in recent weeks.
The marketplace is clearly stating that the near-disastrous prices seen earlier this year "are headed for the history books", according to Jerry Dryer, whose US reports are available at www.dairymarketanalyst.com.
US milk production finally went below last year in August - ever so slightly (0.3 per cent) but for the first time since July 2004, according to reports.
This is obviously a consequence of cow numbers that - as producers have moved seriously to cull cows and as some have culled entire herds and exited the business - are under year ago and likely will continue to decline through most, if not all, of 2010, analysts said.
Milk supplies, all of the sudden, actually are tight in most regions of the US, and demand, all of the sudden, actually is picking up domestically and especially in the international markets, according to reports.
"Both sides of the equation are being adjusted, and more adjustments are in the works," as holiday pull is just around the next couple of weekends, Dryer said.
The tightness was evident in California - the country's largest milk-producing state - last week.
Earlier this year, California processors were assigning producers quotas to control milk supplies, but last week, processors were reporting 4-7pc reductions in supplies from year ago.
In Idaho, processors were putting out calls for more milk, and in the Midwest, processors warned about "a real squeeze" as plants strive to produce specialty products for the holidays.
Sources were even expressing some thoughts that Cooperatives Working Together (CWT), now beginning its fourth herd retirement in the last 12 months, has removed too many cows and producers.
The all-milk price in September was at its highest level since January, and dairy income over feed costs was at its highest level since December, although still far under costs of production.
Shawn Hackett, president of Hackett Financial Advisors Inc. in Boynton Beach, Florida, in a recent report, charted December milk futures over the last 14 months and noted that the long-term downtrend has been "broken with force".
No one anticipates the situation will change soon.
Eric Erba, vice president for government relations at California Dairies Inc., commented that producers have "an awful lot of ground to make up" to recover from losses since the middle of last year, and "I don't expect a surge in milk production anytime soon".
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