Missouri Dairy Business UpdateCommercial Agriculture
Volume 2, Number 12

December 2002

Milk Prices

According to the latest USDA Dairy Outlook, "Fundamental adjustments to recent low dairy prices apparently have begun. Expansion in milk production is poised to slow, as fewer producers build new units and more farmers leave dairying."

"Meanwhile, dairy sales are showing some signs of recovery in response to lower prices and a little economic improvement. Most importantly, growth in cheese use is beginning to pick up."

"Price recovery is not likely to come quickly. Although both supply and demand appear to be moving toward better balance, adjustments were slow to begin and give every indication of being quite gradual. Also, the large commercial stocks of milkfat built during 2002 will continue to overhang markets for several months. Unless the pace of changes accelerates quickly, recovery in dairy prices probably will be quite modest even through late 2003."

Current USDA Milk Price Forecasts
 1st Q 20032nd Q 20033rd Q 2003All 2003
Class III Price9.80 to 10.309.75 to 10.559.85 to 10.8510.00 to 10.80
Class IV Price9.65 to 10.259.80 to 10.7010.35 to 11.4510.10 to 11.00

Source: USDA, ERS, Livestock, Dairy & Poultry Outlook

2003 Milk Futures on the Chicago Mercantile Exchange
Class III$10.00$10.40$10.92$11.24$11.58$12.18$12.62$13.01$13.36$12.69$12.38$11.85
Class IV$10.50$10.55$10.50$10.80$10.90$11.00$11.30 
est. MILC pmt.$ 1.14$ 1.43$ 1.40$ 1.25$ 1.09$ 0.95$ 0.70 

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