Missouri Dairy Business Update Commercial Agriculture
Volume 2, Number 3

March 2002

MILK Price Update

The following long-term milk price outlook was presented at USDA's annual Agricultural Outlook Forum held on February, 22 2002.

James J. Miller

The general patterns projected for the next 10 years remain much the same. Milk supply is expected to grow very slowly. Fueled by further growth in cheese demand, domestic demand for dairy products will also grow slowly. Following a period of sluggish prices during the next couple years, nominal farm milk prices are expected to trend upward slowly. The U.S. market is projected to remain largely isolated from international markets by domestic prices too high to export much without subsidy but too low to import much over TRQ's in most years.

Farm milk prices in 2002 are expected to drop $1.50 to $2 per cwt from 2001's level of almost $15. Prices in 2002 are projected to stay well above those of 2000. A very wide gap between the value of milk for cheese and for butter-powder persisted through 2000 and part of 2001. However, these values moved together in mid-2001 and are expected to stay close during 2002. Click the link below to read the entire paper.

For a shorter-term dairy price outlook, Dr. Bob Cropp at the University of Wisconsin offers this analysis in his March dairy outlook: "Considering this milk market environment, I believe March will be the low milk price for the year. With some expected improvement in cheese prices we could see the Class III rice above $11.00 for April and near $12.00 for June and peaking over $13.00 for September.

The Class IV price is likely to be in the $11.80 range April through May, and then over $12.00 by June. Since nonfat dry milk prices are not likely to show much strength, the Class IV price will depend upon the butter price. With improvement in milk production and available cream supplies, butter prices are expected to stay lower in 2002 as compared to last year. As a result, the Class IV price could stay below $13.00 this summer. If USDA does another butter/powder tilt later this year, nonfat dry milk prices would fall lowering the Class IV price.

Of course weather conditions this summer and resulting crops can greatly impact milk prices either higher or lower." Click the link below for the entire document.


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