|Missouri Dairy Business Update|
|Volume 4, Number 9|
According the USDA's latest Dairy Outlook, "Dairy market fundamentals changed in early summer as milk production began to expand. Additional milk in the months to come should ease dairy markets during the remainder of 2004. Even so, some tightness likely will continue. Demand is expected to stay fairly good, and the growth in supplies probably will be gradual.
The recent increase in cow numbers probably was not due to more heifers entering the herd. The dairy replacement herd was unchanged on July 1, and July replacement prices indicated that the market has been tight. Unusual retention of last lactation cows is much more likely. Between high milk prices and the lack of any summer heat stress, cows probably stayed profitable longer—enough so that any producer capable of stretching capacity probably was tempted.
In 2005, expected much lower milk prices will work to weaken milk cow numbers. However, average declines are projected to be relatively modest, only slightly larger than this year’s. Returns are projected to stay significantly above those of 2002 and 2003, and dairy farmers can prepay 2005 expenses out of this year’s returns."
According to Bob
Cropp at the University of Wisconsin, "Key factors to watch for
future milk prices will be to see if cow numbers continue to increase
and any improvement in milk per cow. But, with a continued improvement
in milk production compared to a year ago, and milk production improving
seasonally, both cheese and butter prices are most likely at their
peak and will decline as we move into October. But, the Class III
price could continue strong for this time of the year, close to $14.00.
By December the Class III price could hold near $12.00. And for the
first quarter of 2005, the Class III price could stay in the mid-$11.00s.
However, some forecasters are much more pessimistic than this. The
futures continue to offer first quarter Class III prices $12.00 plus,
which are above average for this period."
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/