Missouri Dairy Business Update  
Volume 11, Number 6
June 2011

Milk Prices

According to Bob Cropp's Dairy Outlook, "When cheese and butter gets over $2.00 per pound concerns arise as to whether demand will suffer some. But for now, at these existing dairy product prices we are looking at higher milk prices with the Class III price over $19.00 for June and near $20 for July. Class IV prices in be the high $20s for both June and July. Can prices at these levels hold to years end? With high feed prices dairy producers need much higher milk prices but milk prices could show some weakness during summer and fall. Recent reports on the economy are disappointing and not helpful for continued domestic demand growth. Exports however, are still projected to stay above year ago levels to year’s end due to improved world economy and increased dairy product purchases by key customer countries. And of course the level of U.S. milk production for the remainder of the year will be important.

In summary, exactly where milk prices are headed for the remainder of the year is far from certain. We know that milk prices are highly sensitive to rather small percentage changes in milk production, domestic sales and exports and/or anticipated changes in any of these factors. As of now it appears that milk prices may fall some during the August to December period. But, Class III prices may fall no lower than $17 and Class IV no lower than $18.00. This is far from certain. Current dairy futures are settling at these levels. Dairy producers need to evaluate their risk management strategies in attempting to protect future milk prices and also consider feed and other input costs."

Futures on the Chicago Mercantile Exchange
6-28-2011 June July Aug Sept Oct Nov Dec Jan 12 Feb Mar
Class III Milk (per cwt.) $19.23 $20.40 $19.39 $18.70 $17.90 $17.20 $16.73 $16.56 $16.38 $16.30
Class IV Milk (per cwt.) $20.76 $20.49 $19.73 $19.10 $18.75 $18.65 $18.35 $17.70 $17.06 $17.00
Butter (per lb.) $2.13 $2.06 $2.03 $2.03 $2.02 $2.02 $1.99 $1.91 $1.77 $1.75
Source: CME

Current USDA Milk Price Forecasts
6-15-2011 2nd Q 2011 3rd Q 2011 4th Q 2011 1st Q 2012
Class III Price $17.20 to $17.40 $18.25 to $18.75 $17.50 to $18.30 $15.85 to $16.85
Class IV Price $20.15 to $20.45 $19.75 to $20.35 $17.90 to $18.80 $16.70 to $17.80
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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