Missouri Dairy Business Update Commercial Agriculture
Volume 4, Number 3
March 2004

Milk Prices

If you haven't been watching milk futures, expect a happy surprise coming in your milk check in April and May!

Hedging Opportunity Chart for next 12 Months www.uwex.edu/ces/milkmarketing/

Dairy Prices Jump

According to the latest USDA Dairy Outlook, the roots of these price rises lay in the strong finish to the 2003 holiday season. Recovery in demand and continued slight weakness in milk production left pipeline holdings tight and pulled down the heavy warehouse stocks of butter that had dogged dairy markets since the spring of 2002. Prices began to rise as buyers sought some protection from this market tightening. Since then, a series of bullish factors (mostly related to lower expected production) have created self perpetuating price increases as buyer actions to protect against future tightness dried up the current markets.

The peculiar mix of a counter seasonal price rise, tightened current market fundamentals, and the key role of anticipated market conditions make the ultimate size of the price rise, its duration, and the steepness of the subsequent downward adjustment very difficult to gauge. Given expected conditions, elevated wholesale prices are projected to persist through midyear, with gradual declines during the second half of 2004.

Farm milk prices are expected to average more than $14 per cwt in 2004, running well above a year earlier until at least autumn.

Milk prices now seem likely to average substantially higher than the low levels of 2002 or 2003. However, prices may be quite volatile, and a sudden collapse will remain a possibility."

Historical Missouri milk prices may be found at: http://agebb.missouri.edu/modbu/milkprices.htm

2004 Milk Futures on the Chicago Mercantile Exchange
3/18/04 Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan 05 Feb 05
Class III Price $13.95 $17.74 $17.03 $16.05 $15.29 $15.15 $15.30 $14.20 $13.00 $12.50 $12.00 $11.90
Class IV Price $12.77 $13.10 $13.07 $13.75 $13.85 $13.95 $14.05 $14.05 $12.70 $12.44  
est. MILC pmt. $ 0.79                 $0.36    
Note: Estimated MILC Payment from

Current USDA Milk Price Forecasts
3/16/04 1st Q 2004 2nd Q 2004 3rd Q 2004 4th Q 2004
Class III Price 12.15 to 12.35 13.40 to 13.90 13.00 to 13.80 12.45 to 13.45
Class IV Price 12.00 to 12.30 13.20 to 13.80 11.75 to 12.65 11.30 to 12.40
Source: USDA, ERS, Livestock, Dairy & Poultry Outlook

MILC payments
January production will be $0.83/cwt.
February production will be $0.95/cwt.
March production will be $0.79/cwt.
April, production will be $0.02/cwt.

To view the calculations behind the MILC payments and to check the very latest MILC payments check the NE Milk Marketing Administrators website at: www.fmmone.com/Northeast_Order_Prices/MILC%20calculator/DMLP.htm

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