|Missouri Dairy Business Update|
|Volume 11, Number 2|
According to Robert Cropp's Dairy Outlook, "The price of butter, cheddar cheese, nonfat dry milk, dry whey and the Class III and IV prices have all experienced strong increases and are much higher than what were forecasted back in early January. Price changes from the beginning of January to their peak in February were: Butter $1.69 to $2.10; CME cheddar barrels $1.34 to $1.9175 as of February 18th; CME 40 pound cheddar blocks $1.3425 to $1.9550 as of February 18th; Western nonfat dry milk from the range of $1.20 to $1.24 to $1.40 to $1.70; and dry whey from a range of $0.29 to $0.42 to $0.43 to $0.50. Butter prices started to show weakness on February 11th and had declined to $2.005 as of February 18th. The January Class III was $13.48 and will be near $17 for February. As of February 18th, Class III futures settled at $18.51 for March, above $17 through September and down to $16.44 for December. The January Class IV was $16.42 and will be near $18.40 for February. As of February 18th, Class IV futures settled in the $20s through August and were down to $17.44 for December. If these prices hold, the advanced Class IV price will be the mover of Class I prices for all of 2011.
In summary, 2011 appears to be shaping up to being a much better year than earlier predicted with much higher milk prices for the first half of the year, and while lower prices for the second half, they could still average higher than prices experienced the second half of 2010. Dairy producers should evaluate their price risk management strategies and decide whether to protect the price on a portion of their future milk production with opportunities now provided on the futures market. It also needs to be pointed out that despite higher milk prices, with much higher feed costs returns over feed costs will not show the same degree of improvement, especially for those dairy producers who purchase a majority of their feed."
Historical Missouri milk prices may be found at: http://agebb.missouri.edu/dairy/mkt/index.htm