Missouri Dairy Business Update  
Volume 12, Number 2
February 2012

Milk Prices

According to Bob Cropp's Dairy Outlook, "Milk prices set a record high last year but are projected lower this year. USDA’s latest outlook has the average Class III for 2012 between $17.30 to $18.30 compared to $18.37 last year, and the average All Milk Price between $18.70 and $19.70 compared to $20.14 last year. But, existing futures markets have prices lower than this for the year. Class III futures are below $16 March through May and only peak at $16.55 for October. But, the lower Class III futures prices could very well be an over‐reaction to current market conditions. However, dairy product prices continue to decline.

For the short run, milk prices will be lower. The February Class III price may be around $16.10 compare to $17.05 for January. The March Class III price could well fall below $16.00. But, if by April or May indications are that increases in milk production will slow, domestic sales are positive and dairy exports are holding up, we could see considerable improvement in milk prices for the second half of the year. While not certain, at this time the probability of that happening is fairly high, that is if milk production does in fact slow down. Milk prices could then turn out considerably better than what Class III futures currently show. "

Futures on the Chicago Mercantile Exchange
February 27, 2012 Jan Feb Mar Apr May Jun July Aug Sept Oct
Class III Milk (per cwt.) $17.05 $16.07 $15.40 $15.28 $15.29 $15.58 $16.02 $16.14 $16.35 $16.34
Class IV Milk (per cwt.) $16.56 $15.99 $15.43 $15.30 $15.35 $15.65 $16.00 $16.29 $16.45 $16.50
Butter (per lb.)   $1.47 $1.43 $1.49 $1.51 $1.55 $1.56 $1.59 $1.60 $1.62
Source: CME

Current USDA Milk Price Forecasts
2-15-2012 1st Q 2012 2nd Q 2012 3rd Q 2012 4th Q 2012
Class III Price $16.35 to $16.65 $16.10 to $16.70 $17.10 to $18.00 $17.30 to $18.30
Class IV Price $16.00 to $16.40 $16.25 to $16.95 $16.45 to $17.45 $16.30 to $17.40
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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