Missouri Dairy Business Update  
Volume 10, Number 5
May 2010

Milk Prices

According to Bob Cropp's Dairy Outlook, "Milk prices will continue to improve as we move through the year. The speed and extent of improvement depends upon milk production, domestic sales and dairy exports. Earlier milk production was forecasted to decline for the second consecutive year bringing with it much improved milk prices in 2010. It now looks like milk production could actually increase in 2010. USDA is predicting a 0.5% increase. While dairy cow slaughter is now running higher than a year ago the ample supply of dairy replacements is more than enough to maintain the total number of milk cows. Also while milk prices are not at the level earlier anticipated they have improved enough to help many producers to cash flow. With higher milk prices and lower feed costs returns over feed costs are more favorable. The price of corn is about 10% lower than a year ago and 30% lower than two years ago. Soybeans are 3% lower than a year ago and 21% lower than two years ago. The average U.S. alfalfa hay price is 14% lower than a year ago and 30% lower than to two years ago. Improved returns over feed costs and higher producing dairy replacements entering the dairy herd has helped to increase milk per cow and is now running more than 3% above a year ago.

Domestic sales may grow in 2010 by around 1% and the volume of dairy exports is expected to grow 12% or more. First quarter exports for all products were up from a year ago. Increases for the first quarter were as follows: nonfat dry milk/skim milk powder 7%, whey proteins 29%, lactose 19%, cheese 33%, and butterfat 83%. If milk production does increase but no more than 1%, milk prices will continue to strengthen. The Class III price could be above $14.00 by July, in the high $15’s by October and peaking above $16 by November. But, final prices lower or higher than this are possible. It all depends upon how milk production, domestic sales and exports play out as the year progresses."

Futures on the Chicago Mercantile Exchange
5-24-2010 May June July Aug Sept Oct Nov Dec Jan 11 Feb
Class III Milk (per cwt.) $13.36 $13.86 $14.05 $14.53 $14.80 $14.81 $14.77 $14.75 $14.63 $14.63
Class IV Milk (per cwt.) $15.33 $15.45 $15.45 $15.55 $15.60 $15.29 $15.39 $15.48 $15.27 $15.27
Butter (per lb.) $1.58 $1.58 $1.61 $1.61 $1.60 $1.61 $1.63 $1.65 $1.60 $1.60
Source: CME

Current USDA Milk Price Forecasts
5-19-2010 2nd Q 2010 3rd Q 2010 4th Q 2010 1st Q 2011
Class III Price $13.11 to $13.41 $14.26 to $14.86 $14.66 to $15.56 $13.57 to $14.57
Class IV Price $14.23 to $14.63 $14.77 to $15.47 $14.44 to $15.44 $13.74 to $14.84
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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