Missouri Dairy Business Update Commercial Agriculture
Volume 4, Number 7
July 2004

Milk Prices - Steady at Profitable Levels

According the USDA's latest Dairy Outlook, "Milk production remains below a year earlier and is unlikely to recover substantially until after year end. Recovery in cheese demand appears solid, although some slippage in use is possible as a delayed effect of the high prices. Also, the butter market has shown some strength, while nonfat dry milk usage has been boosted by commercial exports. Recent wholesale price drops have lowered expectations for second-half farm milk prices. Even so, milk prices are projected to average well above a year earlier. For all of 2004, prices received by farmers are expected to be more than $3 per cwt above 2003's $12.55."

According to Bob Cropp at the University of Wisconsin, "But with milk production declining both seasonally and from a year ago, existing stocks of both cheese and butter are not adequate to fulfill the strong sales period later this fall and early winter. So both cheese and butter prices have a strong probability to strengthen in August and early September and strengthen milk prices. The Class III price is likely to stay above average for the remainder of the year as well and for the first quarter of 2005, depending upon any improvement in milk production in the months ahead."


2004 Milk Futures on the Chicago Mercantile Exchange
Aug Sept Oct Nov Dec Jan-05 Feb-05 Mar-05 April-05 May-05
Class III 14.84 14.40 15.88 14.79 13.35 12.61 12.30 12.32 12.29 12.25 12.25 12.23
Class IV 13.75 13.25 13.00 12.60 12.20 12.50            
Butter Futures     1.6995 1.6800   1.5200     1.5200   1.5200  
est. MILC pmt.           0.25            
Note: Estimated MILC Payment from http://cpdmp.cornell.edu/

Current USDA Milk Price Forecasts
  1st Q 2004 2nd Q 2004 3rd Q 2004 4th Q 2004
Class III Price 12.66 19.31 13.65 to 14.05 13.00 to 13.70
Class IV Price 12.43 14.26 12.90 to 13.40 11.85 to 12.65
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/dairy/mkt/index.htm

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

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