Missouri Dairy Business Update

Volume 16, Number 1
January 2016

Milk Prices

According to Bob Cropp's January Dairy Outlook, "Falling dairy product prices end of 2015 and into 2016 spells much lower milk prices first quarter of this
year. While it is not unusual for butter and cheese prices to fall after the holiday orders are filled, prices have taken a significant fall."

"USDA forecast for 2016 is for milk cows to average 0.2% lower and milk per cow to average 1.8% higher netting a 1.6% increase in milk production. Lower milk prices will be partially offset by lower feed prices, but we could see dairy producer culling more cows and milk per cow may increase less than 1.8% netting less than a 1.6% projected increase in milk production."

"U.S. dairy exports will keep a damper on milk prices at least for the first half of the year. There remains a buildup of world dairy stocks that need to be worked off before world prices increase and before we can expect improvement in U.S. dairy exports. U.S. also can expect to see strong competition for markets from the EU and New Zealand. How soon world stocks are reduced will depend upon what happens to
milk production in the EU and New Zealand."

"As the year progresses milk prices will improve. As of now it looks like the Class III price will average below $14 for the first quarter, but could be in the $14’s for the second quarter, the $15’s third quarter and the $16’s fourth quarter. If this holds, the Class III milk price will average about $0.50 to $0.60 lower than the $15.80 average for 2015. The latest USDA milk price forecast has prices averaging lower than this with an average Class III in the ranger of $14.05 to $14.85 and the average All Milk Price in the range of $15.35 to $16.15. But, a lot can change as we move through the year. I think the odds for milk prices ending up better than this is higher than ending up lower."

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CME Class III and Class IV Milk Futures
1-29-2016 Jan Feb. Mar Apr May June July Aug Sept Oct

Class III Milk
($ per cwt.)

13.74 13.82 13.80 13.90 14.17 14.54 14.96 15.36 15.65 15.83

Class IV Milk
($ per cwt.)

13.31 13.81 14.05 14.31 14.48 14.57 14.84 14.89 15.13 15.09

Historical Missouri milk prices including comparison to the USDA National All Milk Price used for MPP may be found at:http://dairy.missouri.edu/mkt/index.htm