Missouri Dairy Business Update  
Volume 11, Number 10
October 2011

Milk Prices

According to Bob Cropp's Dairy Outlook, "With milk production increasing relatively strong for both August and September and softness in both U.S. dairy sales and dairy exports dairy product prices have weakened which means lower farm milk prices. USDA estimated August milk production 2.1% higher than a year ago with some slow down for September production, up 1.7%. The September increase was due to 1.0% more milk cows than a year ago but just 0.7% more milk per cow.

A growth in milk production well under 2% would help to support higher milk prices. USDA estimates milk production to end up 1.6% higher for 2011 with another 1.3% increase in 2012. If Class III prices do drop well below $17 this winter, with high feed prices increased herd culling, less herd expansions and increased exiting of dairy producers can be anticipated. This would slow increases in milk production and support higher milk prices. The increase in cow numbers, which increased month-to-month beginning October of last year through August of this year may have already stopped. The estimated 9.209 million head for September was the same as August. High feed prices will also dampen increases in milk per cow. Unless dairy exports decline significantly, and this is not anticipated, there is a good probability milk prices could strengthen and be higher than what Class III futures are now showing by the second and third quarters of 2012. But, the $20 Class III prices experienced this year are not likely in 2012."

Futures on the Chicago Mercantile Exchange
10-24-2011 Oct Nov Dec Jan 12 Feb Mar Apr May Jun July
Class III Milk (per cwt.) $18.00 $17.87 $17.25 $16.66 $16.26 $16.23 $16.16 $16.09 $16.27 $16.57
Class IV Milk (per cwt.) $18.35 $18.20 $17.39 $17.00 $17.05 $17.00 $17.05 $17.05 $17.09 $17.00
Butter (per lb.) $1.78 $1.84 $1.75 $1.73 $1.73 $1.75 $1.78 $1.78 $1.80 $1.82
Source: CME

Current USDA Milk Price Forecasts
10-18-2011 4th Q 2011 1st Q 2012 2nd Q 2012 3rd Q 2012
Class III Price $17.85 to $18.25 $16.50 to $17.20 $15.55 to $16.55 $16.50 to $17.50
Class IV Price $17.85 to $18.35 $16.55 to $17.35 $16.20 to $17.30 $16.35 to $17.45
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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