A swift recovery in cheese demand and negative production growth have driven the price of Class III milk from $16,53 per cwt. on April 15 to $21.36 on May 13. This rapid increase in the Class III milk price, in combination with lower corn prices, means improved dairy margins.

Ben Buckner, chief grains and dairy analyst for AgResource Co., noted that HPAI in dairy cows may have also contributed to the price spike since it challenges herd growth. U.S. milk production declined .5% to 1% each of the last ten consecutive months. Buckner predicted milk production contraction would continue into at least July and that the USDA would be forced to lower its milk production estimate for 2024. This would be the sixth revision this year.

Much of the decline can be attributed to a shortage of replacement dairy heifers. Meanwhile, there are no signs that demand is slowing.

Read more on the outlook for Class III milk here.