Missouri Dairy Business Update

Volume 18, Number 2
February, 2018

Milk Prices

According to Bob Cropp's February Dairy Outlook, " Weaker dairy product prices have pushed milk prices lower. The Class III price peaked last November at $16.88 and fell to $14.00 in January and February will be near $13.50. The Class IV price peaked last August at $16.61 and has been declining since to $13.13 in January and February will be near $13.00. It looked like both the Class III and Class IV prices would stay in the $13’s at least through March. But, the good news is cheese prices have improved during February and if they hold or improve more, the Class III price could reach about $14.25 in March."

"How milk prices play out from here out will of course depend upon the level of milk production, domestic sales and exports. USDA has lower their increase in 2018 milk production from 1.8% earlier to now 1.5%. USDA forecasts the average number of milk cows for the year to increase slightly to 0.2% which is reasonable considering low milk prices will likely result in some producers exiting and a slowdown in dairy expansions. USDA forecasts milk per cow to increase just 1.3% which also is reasonable considering some forage quality issues particularly in the Northeast and Upper Midwest will impact milk per cow until the new crop this summer, plus lower returns over feed cost will result in some producers reducing the amount of grain or dairy concentrates fed. So we can expect milk prices to continue to improve as we move through year especially if the increase in milk production does stay well below 2%."

"But, as of now the dairy outlook appears a little brighter than last month. Class III dairy futures continue to improve reaching the $15’s by July, and the low $16’s by October with an average of about $15.00 for the year. I could see a similar price pattern, if not even a little higher the last half of the year, if the increase in milk production remains well below 2% and dairy exports still show growth in 2018. But, Class III will still average well below the $16.17 average last year. Class IV dairy futures show a slow increase as we move through the year staying in the $13’s for the first half of the year and only improving to the $14’s for the second half and averaging about $14.00 for the year compared to $15.16 last year."

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CME Class III and Class IV Milk Futures
1-26-2018 Feb Mar Apr May Jun July Aug Sep Oct Nov

Class III Milk
($ per cwt.)

13.44 13.97 13.96 14.12 14.65 15.21 15.55 15.80 15.87 15.80

Class IV Milk
($ per cwt.)

12.94 13.41 13.83 13.83 14.07 14.33 14.45 14.64 14.78 14.92

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