Missouri Dairy Business Update  
Volume 10, Number 8
August 2010

Milk Prices

According to Robert Cropp's Dairy Outlook, "The question is will milk prices continue to strengthen the rest of the year. The following factors point to further increases in milk prices with Class III reaching the high $15’s: lower than normal milk composition reducing the yield of manufactured products per 100 pounds of milk; the normal seasonal decline in milk production; more hot and humid weather that depressed milk per cow; the opening of schools which increases fluid (beverage) milk sales and cheese sales; the completion of the 10th round of CWT removing more than 34,000 cows; and anticipated dairy exports continuing above year ago levels. But, crucial to higher milk prices is the level of total milk production. The level of milk production will continue to depend upon whether the nation’s cow herd continues to build and milk per cow. Despite some recent strengthening of corn, soybeans and hay prices improved milk prices over a year ago has made returns over feed costs more favorable for feeding for higher production per cow. Prior to the 10th round of CWT cow slaughter was running below a year ago. July 1st cattle inventory showed dairy replacements 3% higher than a year ago averaging 44.5 per 100 milk cows compared to 42.9 a year ago. So there is the potential that milk production could continue to run close to 2% higher than a year ago. This will challenge much higher milk prices unless domestic demand and exports improve more than now expected. Fluid milk sales have been running about 1% below a year ago. While American cheese sales have been running a little below a year ago the sales of other cheese types, mainly Italian cheeses have been much improved. The continuation of higher dairy exports will be important in maintaining and further strengthening milk prices for the remainder of the year. Class III futures are settling above $15.00 through October but in the $14’s the rest of the year and all of 2011. But there still a good possibility that prices could do better than this."

Futures on the Chicago Mercantile Exchange
8-26-2010 Aug Sept Oct Nov Dec Jan 11 Feb Mar Apr May
Class III Milk (per cwt.) $15.15 $15.74 $15.61 $15.03 $14.54 $14.16 $14.05 $14.02 $14.04 $14.15
Class IV Milk (per cwt.) $15.62 $16.45 $16.74 $16.10 $15.30 $14.60 $14.50 $14.45 $14.32 $14.15
Butter (per lb.) $1.84 $2.09 $2.06 $1.89 $1.73 $1.63 $1.59 $1.58 $1.57 $1.58
Source: CME

Current USDA Milk Price Forecasts
8-18-2010 3rd Q 2010 4th Q 2010 1st Q 2011 2nd Q 2011
Class III Price $14.60 to $14.90 $14.80 to $15.40 $13.95 to $14.85 $13.90 to $14.90
Class IV Price $15.35 to $15.75 $14.70 to $15.40 $14.00 to $15.00 $13.75 to $14.85
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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