Missouri Dairy Business Update  
Volume 10, Number 11
November 2010

Milk Prices

According to Robert Cropp's Dairy Outlook, "The growth in milk production is bound to slow in the months ahead. Much higher feed prices and lower milk prices will make returns over feed cost much less favorable. While this situation will not be nearly as bad as what was experienced in 2009, it is likely to slow the increase in milk per cow and encourage heavier culling of milk cows as wells increased sell outs of dairy herds, particularly during the first half of 2011. With the more than ample supply of dairy replacements, the average size of the 2011 nation’s dairy herd may still end up slightly higher than the 2010 average, and perhaps a 1% plus increase in milk per cow could result in around a 1.5% increase in total milk production compared to an estimated increase of 1.8% for 2010. An anticipated increase in cheese sales should improve domestic milk sales in 2011. Dairy exports are projected to decline in 2011, particularly cheese and butter, but yet remain favorable to providing some support to dairy product prices and milk prices. Considering these factors, as of now it appears that farm milk prices could show considerable strength for the second half of 2011 as compared to the first half. Class III futures are trading below $14.00 first quarter, in the low $14’s the second quarter, reaches $15 by July and peaks at $15.50 October and November. I think the probability that prices could do a little better than this is fairly high, especially for the second half of the year after producers respond to deteriorated returns over feed cost experienced early in the year."

Futures on the Chicago Mercantile Exchange
11-29-2010 Nov Dec Jan 11 Feb Mar Apr May June July Aug
Class III Milk (per cwt.) $15.43 $13.81 $13.64 $13.65 $14.00 $14.15 $14.20 $14.48 $15.10 $15.33
Class IV Milk (per cwt.) $16.69 $15.46 $14.80 $14.55 $14.51 $14.69 $14.65 $14.80 $14.80 $14.73
Butter (per lb.) $2.03 $1.60 $1.56 $1.55 $1.57 $1.59 $1.61 $1.62 $1.65 $1.66
Source: CME

Current USDA Milk Price Forecasts
11-19-2010 4th Q 2010 1st Q 2011 2nd Q 2011 3rd Q 2011
Class III Price $15.25 to $15.55 $14.10 to $14.70 $14.45 to $15.35 $14.55 to $15.55
Class IV Price $16.35 to $16.75 $15.00 to $15.70 $14.20 to $15.20 $14.20 to $15.30
Source: USDA, ERS, Livestock, Dairy & Poultry Outlook

Historical Missouri milk prices may be found at: http://agebb.missouri.edu/dairy/mkt/index.htm

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