Missouri Dairy Business UpdateCommercial Agriculture
Volume 3, Number 1

January 2003


Milk Prices

Since last month, the USDA has slightly trimmed their expected milk prices for 2003.

However, the futures market, which had been more optimistic about 2003 prices than the USDA seems to have become pessimistic. Since the last issue of Missouri Dairy Business Update, class III futures prices have dropped around $1.00 per cwt for many of the months in 2003.

It seems that many traders kept expecting low prices to encourage dairymen to do extra culling or to quit. However, every month the milk production statistics continues to show rising cow numbers, rising milk production, and rising stocks in cold storage.

Dairy product stocks continue to grow in cold storage, weighing heavily upon the market. The futures market appears to be spooked that the MILC payments are keeping smaller producers in business, who would otherwise exit the industry, leading to constant overproduction and stable low prices. Until evidence of declining cow numbers or milk production appears, the milk futures prices may not improve.

The MILC payment for January milk production will be $1.41.

The MILC payment for February milk production will be $1.56

Current USDA Milk Price Forecasts
16-Jan-03
 1st Q 20032nd Q 2003 3rd Q 2003 4th Q 2003
Class III Price 9.60 to 10.00 9.70 to 10.40 9.85 to 10.85 10.65 to 11.65
Class IV Price 9.75 to 10.25 9.85 to 10.65 10.35 to 11.45 10.45 to 11.55
Source: USDA, ERS, Livestock, Dairy & Poultry Outlook

2003 Milk Futures on the Chicago Mercantile Exchange
28-Jan-03
 JanFebMarchAprilMayJuneJulyAug SeptOct NovDec
Class III $ 9.76 $ 9.82 $ 9.97 $10.19 $10.48 $11.10 $11.72 $12.38 $12.71 $12.21 $12.05 $11.79
Class IV $10.25 $10.35 $ 10.41 $10.69 $10.68 $11.00 $11.30      
est. MILC pmt. $ 1.41 $ 1.56 $ 1.49 $ 1.46 $ 1.35 $ 1.26 $ 1.17      
(Note: Estimated MILC Payment from cpdmp.cornell.edu/)


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