Missouri Dairy Business Update Commercial Agriculture
Volume 4, Number 5
May 2004

Milk Prices - Are the good times really over for good?

The final milk check for milk produced in May will be one to hang on the wall. Dairy product prices and futures for the 3rd and 4th quarter have been falling back to more normal levels. Missouri dairymen are asking, "How long can the good times last?

According the USDA's latest Dairy Outlook, "With milk production likely to stay below a year earlier through most of 2004, the key to how long dairy prices stay high will be the strength of demand recovery. Restaurant demand came back in the first quarter after more than 2 years of sluggishness, joining the earlier recovery in retail and (to a lesser extent) food processor use. Cheese demand was so brisk that cheese production not only pulled very large amounts of milk from other uses, but also apparently used so much nonfat dry milk in the vats that the seemingly endless surplus of skim solids virtually disappeared."

"The core question for dairy markets in the coming months is how much of the recent cheese movement has actually been eaten. In extreme markets, buyers are understandably more concerned with what might happen than what is most likely to occur. Precautionary buying for future needs can easily push prices beyond sustainable levels. If declines in milk production start to ease as expected, dairy product prices probably will start to slip this summer. Even so, farm milk prices probably will be a record in 2004, up as much as $4 per cwt from 2003."

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

2004 Milk Futures on the Chicago Mercantile Exchange
5/27/2004
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
Jan-05
Feb-05
Mar 05
Class III
20.55
16.32
14.40
14.25
14.27
13.80
12.80
12.05
11.95
12.03
11.98
Class IV
14.45
14.30
14.25
14.10
13.55
13.55
12.70
13.19
est. MILC pmt.
0
0
0
0
0
0
0.05
0.44
Note: Estimated MILC Payment from http://cpdmp.cornell.edu/

The latest USDA Dairy Outlook forecasts the following prices for 2004.

Current USDA Milk Price Forecasts
18-May-04        
 
1st Q 2004
2nd Q 2004
3rd Q 2004
4th Q 2004
Class III Price
12.16
19.70 to 20.00
16.85 to 17.45
13.30 to 14.20
Class IV Price
11.88
14.05 to 14.45
12.35 to 13.05
11.45 to 12.45
Source: USDA, ERS, Livestock, Dairy & Poultry Outlook http://www.ers.usda.gov/publications/so/view.asp?f=livestock/ldp-mbb/

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

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


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