Missouri Dairy Business Update
Volume 2, Number 10
October 2002

Like a mirage in the desert, better milk prices always seem to be just over the horizon, only to evaporate as we approach. That remains the case this month. Since last month there has been very little change in the milk futures for the next six months. Every rally in cheese prices seems to top out, and slide back.

Price Outlook
Ken Bailey reports: http://dairyoutlook.aers.psu.edu/

"The Class III futures prices are very close to market lows. The futures prices as of 10/25/02 expect the Class III price to fall from $10.65 per cwt in October 2002 to $9.60-$9.80 per cwt in November and December. Class III futures prices are expected to average $11.60 per cwt for 2003. This is down from a 2003 Class III average futures price of $11.89 per cwt just a few weeks ago."

"Historically speaking, the Class III price averaged $12.08 per cwt for the 57 months between January 1998 and September 2003. Thus, producers looking to forward contract or hedge milk now for 2003 should avoid locking in too much, particularly since it is so far below the 5-year average. If we are indeed at the "bottom" of the market, it is more likely than not that milk prices, and futures prices, will improve hereafter."

Expected MILC payments in 2003
Cornell has a site that forecasts future MILC payments at http://cpdmp.cornell.edu/

Historical perspective
For people seeking more historical understanding of how our milk prices compare, check University of Wisconsin's "Understanding Dairy Markets" site: http://www.aae.wisc.edu/future/front_cash_prices.htm

CLASS III and BFP							Source: http://www.nass.usda/gov/wi/
(Class III since January 2000)
Year	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec	Avg.
1995					11.12	11.42	11.22	11.57	12.11	12.60	12.87	12.91	11.98
1996	12.73	12.59	12.70	13.09	13.78	13.91	14.49	14.97	15.37	14.13	11.61	11.34	13.39
1997	11.94	12.46	12.49	11.44	10.70	10.74	10.86	12.07	12.79	12.83	12.96	13.29	12.05
1998	13.25	13.32	12.81	12.01	10.88	13.10	14.77	14.99	15.10	16.04	16.84	17.34	14.20
1999	16.27	10.27	11.62	11.81	11.26	11.42	13.59	15.79	16.26	11.49	9.79	9.63	12.43
2000	10.05	9.54	9.54	9.41	9.37	9.46	10.66	10.13	10.76	10.02	8.57	9.37	9.74
2001	9.99	10.27	11.42	12.06	13.83	15.02	15.46	15.55	15.90	14.60	11.31	11.80	13.10
2002	11.87	11.63	10.65	10.85	10.82	10.09	9.33	9.54	9.92	---	---	---	10.52

October 29, 2002

	October	November	December	January 03	February 03	March 03
Class III	10.65	9.60	9.74	10.10	10.41	10.70
Class IV	10.30	10.50	10.55	10.65	10.80	10.95

Source: Merc website: http://www.cme.com/prices/index.cfm

For historical price trends between futures & Missouri milk prices check: http://agebbfp.missouri.edu/commag/beefanddairy/Basis.htm