Milk Prices

According to Robert Cropp's Dairy Outlook, "On September 17th, dairy futures showed Class III peaking in September at $16.30, declining to $15.40 by December and continuing to decline into 2011 falling below $14 by April. But, this may be too pessimistic. Milk production could very well slow down from what USDA now forecasts. Considerably higher feed costs this winter may be a key factor resulting in higher culling of dairy cows, some reduced grain and concentrate feeding as well as slow down or delay in expansion decisions (ag lenders are more cautious in making loans for expansion). Corn, soybeans and hay prices are all forecasted higher than a year ago. As of September 17th corn for December delivery was $5.13 per bushel compared to the $3.59 December average a year ago and the highest in two years. Soybeans for November delivery were $10.69 per bushel compared to $9.96 a year ago. The price of August alfalfa hay for the U.S. was 4.5% higher than a year ago with prices up as much as 19% for California. 6.6% for Idaho, 8.3% for New Mexico and 11% for Wisconsin.

The level of domestic sales and dairy exports will also be key factors. Fluid milk sales were 1.4% lower than a year ago January through July and may not show much improvement. Cheese and butter sales have been more favorable. Both butter and cheese sales depend heavily upon the restaurant business. However, the restaurant business continues to be sluggish. Dairy exports are projected to continue to run well above year ago levels for the remainder of this year with further growth for 2011.

In summary, we can expect some weakening of milk prices from their peak in September or October and into early 2011. But, there is a high probability that prices will be higher than currently shown by dairy futures."