Missouri Dairy Business Update  
Volume 5, Number 7
July 2005

Milk Prices

According to USDA's July Dairy Outlook, "Whether demand can continue to absorb likely supplies is questionable. Economic and income growth are expected to be brisk enough to sustain recent demand, but this yearís experience implies that erratic demand is more likely. Second-half seasonal increases in dairy product and farm milk prices are projected to be quite modest, and prices may continue to seesaw. On the other hand, a major drop in prices does not seem likely through the end of the year. For the year, farmers are projected to receive an average price only about $1 per cwt less than last yearís record."

According to the July Dairy Outlook published by Bob Cropp: "As already mentioned, the seasonal decline in milk production, stocks fairly well in balance and the need to build adequate inventory for the strong seasonal fall sales may help to hold up cheese, butter and milk prices at least through September. Nevertheless, the prediction of $15.00 plus Class III price for September is no longer likely. A peak just above $14.00 is more likely. While the Class III futures is showing a drop in Class III prices after September, they could still be a little optimistic after this production report., especially if the next production report shows similar milk production increases. A Class III price in the low $13.00ís by November and in the high $12.00ís by December is a real possibility. While these prices may seem low, they would still be above the 5-year averages for these months."

2005 Milk Futures on the Chicago Mercantile Exchange
June July
Class III 13.60 14.16 14.09 13.40 13.40 13.00 12.98 12.98 12.82 12.83 12.88 13.20
Class IV 13.05 13.10 12.80 12.80 12.80              
Butter Futures
MILC pmt.
Source: Estimated MILC Payment from http://cpdmp.cornell.edu/
Source: Actual MILC Payment from http://www.fmmone.com/Northeast_Order_Prices/MILC%20calculator/DMLP.htm

Current USDA Milk Price Forecasts
1st Q 2005
2nd Q 2005
3rd Q 2005
4th Q 2005
Class III Price
$13.65 to $14.05
$12.75 to $13.45
Class IV Price
$12.50 to $13.00
$11.90 to $12.70
Source: USDA, ERS, Livestock, Dairy & Poultry Outlook

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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