Missouri Dairy Business Update

Volume 17, Number 1
January 2017

Milk Prices

According to Bob Cropp's January Dairy Outlook, "USDA’s milk production report estimated December milk production to be 2.2% higher from a year ago, the results of 0.4% more cows and 1.8% more milk per cow. This brings total milk production for the year to 212.5 billion pounds, 1.9% more than 2015. The increase in milk production was driven primarily by more milk per cow which was 1.7% higher than 2015. The average number of milk cows was just 0.2% higher than 2015."

"Milk prices ended the year much improved over prices during the first half. The Class III averaged just $13.48 for the first half, but improved to $16.25 for the second half. Class III was $16.76 for November and the high for the year of $17.40 for December. The Class IV price averaged $13.18 for the first half and $14.36 for the second half and the high for the year of $14.97 for December."

"Forecasts are for improved milk prices in 2017. USDA is forecasting the average number of milk cows to increase 0.4% and milk per cow to increase 1.8% resulting in 2.2% more milk to be produced. With that relatively strong production increase how much milk prices increase will depend upon continue good butter and cheese sales and continued growth in dairy exports. Continued growth in the economy and improved consumer confidence spells well for good sales. Milk production for four of the major exporters - EU, New Zealand, Australia and Argentina - are expected to be lower than a year ago and not expected to show increases any time before the second half of the year. U.S. is the only major exporter experiencing higher milk production. World demand is also improving with more activity from China, Southeast Asia and others. The world supply and demand is slowly tightening and world dairy product prices are increasing. These are favorable factors for growth in U.S. dairy exports."

"The January Class III price could be about $16.50 and the Class IV price near $16.00. But, unless cheese prices rebound the Class III could fall below $16 for February. But, Class III should stay in the $16’s through May or June and then move into the $17’s for the remainder of the year. The Class III price could average more than $2.00 higher than 2016. The Class IV price could be in the $16’s first quarter than in the $17’s for the remainder of the year. Any changes in expected milk production, sales or exports could result in quite different prices. Dairy producers may want to use some price risk management tools to take advantage of relatively high Class III and Class IV futures. Currently Class III futures are averaging $17.52 for the year and Class IV futures $17.19."

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CME Class III and Class IV Milk Futures
1-27-2017 Feb Mar Apr May June July Aug Sept Oct Nov

Class III Milk
($ per cwt.)

16.61 17.15 17.43 17.51 17.67 17.81 17.88 17.88 17.72 17.60

Class IV Milk
($ per cwt.)

16.07 16.08 16.06 16.39 16.58 16.71 16.92 17.05 17.15 17.23

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