Missouri Dairy Business Update

Volume 16, Number 12
December 2016

Milk Prices

According to Bob Cropp's December Dairy Outlook, "Milk prices ended the year on a stronger note. The November Class III price was $16.76 and the December Class III will be near $17.30."

"U.S. milk production for November was estimated to be 2.4% higher than a year ago. This makes two consecutive months of relatively strong milk production since the October increased was revised to 2.5%. Strong increases in milk per cow is the primary reason for the increase in milk production. November milk cows were just 0.2% higher than a year ago. But, milk per cow was 2.2% higher. We can expect December milk production to be up similar to November resulting in about 212.4 billion pounds of milk for the year, an increase of 1.8% over last year."

"We should see continued improvement in milk prices as we move through 2017. Continued relatively strong milk production may dampen the increase, but continued strong butter and cheese sales along with further improvement in dairy exports will strengthen milk prices. Improved milk prices along with lower feed costs will stimulate an increase in milk production. USDA is forecasting milk production for 2017 to total 216.8 billion pounds, an increase of 2.1% over 2016."

"As of now the Class III price could be in the low $16's first quarter, the mid-16's second quarter, and in the high $16's the start of the third quarter reaching the $17's by the end the quarter through the fourth quarter. This would put the average for the year around $16.85, about $2 higher than 2016. USDA's forecasts little lower prices with a range of $15.85 to $16.65. Current Class III futures is much more optimistic with Class III in the $17's all year and averaging about $17.50 for the year."

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CME Class III and Class IV Milk Futures
12-21-2016 Dec Jan Feb Mar Apr May June July Aug Sept

Class III Milk
($ per cwt.)

17.32 16.57 16.85 17.13 17.43 17.53 17.59 17.72 17.76 17.83

Class IV Milk
($ per cwt.)

15.05 16.46 16.74 17.01 17.29 17.40 17.56 17.70 17.83 18.00

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