As dairy producers have begun to receive their August 2003 milk checks, they have been pleased to notice that prices are nearly a dollar higher than payment s received in August for milk produced in July. Yet, it is hard to ignore the negative value that shows up for the Producer Price Differential or the PPD. Why is the producer price differential negative? The short answer is because cheese prices for August milk were higher than fluid milk prices, which is a sign that prices are going up. Let’s look at the answer in more detail.