How will the support increase affect dairy prices?

U.S. Ag Secretary Tom Vilsack announced Friday morning a temporary increase in the support price for dairy products, which will mean an increase in the price paid to farmers for milk.

From August through October of this year, the price paid for nonfat dry milk increase from $0.80 per pound to $0.92 per pound, the price paid for cheddar blocks from $1.13 per pound to $1.31 per pound, and the price of cheddar barrels from $1.10 per pound to $1.28 per pound. USDA says the increase will result in the government purchase of an additional 150 million pounds of non-fat dry milk and an additional 75 million pounds of cheese.

Ken Heiman is a cheesemaker in Wisconsin: he says this is going to take away a lot of the cheese that has been going to the Chicago Mercantile Exchange. Most of that cheese has come from the western United States, Heiman thinks that is what the Commodity Credit Corporation will purchase, “And we will virtually create a shortage and we will take the price up.”

He also believes this will push the farm milk price up $2.00 or-so, “Industry buyers have no problem with $1.50 cheese but everything has been based on the Chicago Mercantile.” Heiman does not see the higher prices affecting retail prices that much, he notes that retail did not follow the market to the bottom, “So we’ll see the stores absorb a lot of this increase.”

 AUDIO: Ken Heiman talks about how the market should react 2:00

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