Missouri Dairy Business Update

Volume 17, Number 12
December 2017

Milk Prices

According to Bob Cropp's December Dairy Outlook, "USDA estimated November milk production at 1.0% higher than a year ago. If December has a similar increase, the year will end up with 215.4 billion pounds of milk, 1.4% more than 2016. But, leap year adjusted the increase would be 1.7%. This is a lot of milk considering milk production increased 1.6% (leap year adjusted) in 2016. This strong milk production is putting downward pressure milk prices. The November increase was the result of 0.6% more cows and just 0.5% more milk per cow."

"When milk production increases well above 1% strong domestic sales along with good dairy exports are required to hold up milk prices. Latest export data are for October. While nonfat dry milk/skim milk powder exports ran well above year ago levels from the last half of last year through July of this year, they have fallen lower since due to strong competition from both the EU and Canada exports. October exports were 34% lower than a year ago. The loss of exports has pushed nonfat dry milk prices to now a historic low. Cheese exports have slowed but October exports were still 9% higher than a year ago. Butterfat exports were 13% higher and dry whey exports 9% higher. On a total milk solids equivalent basis October exports were still 15.2% of U.S. milk production and 14.3% year-to-date"

"It now looks like we will see Class III prices in the $14’s for the first half of the year and Class IV in the $13’s. Current Class III futures even has Class III in the $13’s February and March. But, with milk prices this low milk production may moderate the second half of the year. We can expect milk prices to improve for the second half of the year with Class III in the $15’s and Class IV in the $14’s with possible $15’s last quarter. If prices end up at these levels, Class III would average for the year about $1 lower than 2017 at $15.20. The Class IV price would average about $0.85 lower at $14.30. I would not rule out milk prices doing somewhat better than this for the second half of the year. Milk production could increase less than 1.7%. World milk production also may not increase as much. For example, New Zealand is now experiencing a drought and if rains don’t come soon, its growth in milk production will be reduced. World demand could also end up higher. It doesn’t take big changes to change milk prices"

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CME Class III and Class IV Milk Futures
12-21-2017 Dec Jan Feb Mar Apr May June July Aug Sept

Class III Milk
($ per cwt.)

15.44 13.97 13.70 13.75 14.00 14.36 14.80 15.19 15.36 15.53

Class IV Milk
($ per cwt.)

13.60 13.21 13.19 13.40 13.67 13.93 14.21 14.38 14.67 14.90

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