Missouri Dairy Business Update  
Volume 11, Number 1
January 2011

Milk Prices

According to Robert Cropp's Dairy Outlook, "A key for the level of milk production in 2011 will be feed prices. Much higher grain and hay prices will lower returns over feed costs. This is likely to increase cow slaughter and dampen the increase in milk per cow. The growth in milk production ought to slow as we move through the year. But, with the good supply of dairy replacements the average size of the nation’s dairy herd may not fall below that of 2010. But with a smaller increase in milk per cow milk production for the year might be up less than 1.5%. Some improvement in domestic sales is anticipated and while exports may be lower relatively tight world supplies due to anticipated strong world demand and reduced level of increased milk production in Oceania will keep exports at a historically high level.

Under this situation we could see the Class III price averaging in the low $14’s for the first half of the year and then showing good improvement for the second half with a peak in the low $16’s for October or November. With the recent run up in cheese prices Class III dairy futures showed strong increases for all month in 2010. But, with start of lower cheese prices on November 19th and a rather strong December milk production all 2010 months for Class III futures showed weakness at the end of trading on January 19th"

Futures on the Chicago Mercantile Exchange
1-21-2011 Jan 11 Feb Mar Apr May June July Aug Sept Oct
Class III Milk (per cwt.) $13.50 $15.93 $16.25 $16.42 $16.50 $16.38 $16.44 $16.51 $16.52 $16.58
Class IV Milk (per cwt.) $16.20 $17.20 $18.50 $18.00 $18.45 $18.25 $18.25 $18.15 $18.00 $17.80
Butter (per lb.) $1.82 $2.04 $1.98 $1.94 $1.90 $1.89 $1.92 $1.92 $1.92 $1.99
Source: CME

Current USDA Milk Price Forecasts
1-19-2011 1st Q 2011 2nd Q 2011 3rd Q 2011 4th Q 2011
Class III Price $13.60 to $14.00 $14.45 to $15.15 $14.85 to $15.85 $14.40 to $15.40
Class IV Price $15.70 to $16.20 $15.00 to $15.80 $14.60 to $15.70 $14.35 to $15.45
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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