Milk Prices

Just when it looked like milk prices were going to drop below the trigger to start MILC payments, markets rallied and it looks like 2004 will finish with excellent milk prices. At this point, MILC payments look set to being in March with an estimated payment of $0.21/cwt.

According the Ken Bailey's Weekly Dairy Market Outlook, "The market showed surprising tightness this week with prices rising at the Chicago Mercantile Exchange. Block cheese prices rose from $1.7250 per pound on Monday, November 15 to $1.7950 per pound by Friday, November 19. Barrel prices rose from $1.6925 per pound on Monday to $1.75 per pound by Friday. Butter prices rose as well, from $2.01 per pound on Monday to $2.1025 per pound by Friday.

It is not surprising that demand is seasonally strong this time of year. But demand is above market expectations. While we don’t have the USDA approved numbers yet, USDA is reporting strong demand for fluid milk products and egg nog, dip, bottled cream, sour cream and cream cheese. This demand plus normal consumption for cheese has created a shortage of milk fat. Thus churning activity across the country is very slow. In addition, Cooperatives Working Together (CWT) announced on November 17 that they were accepting bids to retire a total of 51,700 head of milking cows. Thus, there is tightness in the milk supply, stronger than usual demand for Class I and II products, and now the CWT program has resulted in a run up in cheese and butter prices."