Missouri Dairy Business Update  
Volume 5, Number 9
September 2005

Milk Prices

According to the USDA’s September Dairy Outlook, “Expansion in milk output is now well established, and only modest deceleration is expected in 2006. This year, robust domestic and foreign demand are expected to absorb the extra supplies with only about a $1 per cwt decline in farm milk prices from the 2004 record. Price declines are expected to be larger in 2006, as demand growth may not be able to handle the second straight large increase in milk output.”

According to the September Dairy Outlook published by Dr. Bob Cropp at the University of Wisconsin, “In summary, milk prices will decline seasonally for November and December and will likely fall below 2005 prices for the first quarter of 2006, but prices will be above the 5-year average. Milk production and milk and dairy product sales will determine milk prices in 2006. But, the probably is for the growth in milk production to keep milk prices below those experienced in 2005. The Class III price will likely peak below $14.00 (CME September 2006 Class III futures was at $13.75) and the average Class III price for the year around $12.25, which would be near the 5-year average. But, we know milk prices are very sensitive to rather slight changes in production and sales so things could turn out quite different.”

2005 Milk Futures on the Chicago Mercantile Exchange
09/27/05
Sept
Oct
Nov
Dec
Jan-06
Feb
Mar
Apr
May
Jun
Jul
Aug
Class III
$14.27
$14.39
$13.65
$13.39
$12.81
$12.55
$12.59
$12.51
$12.58
$12.80
$13.16
$13.30
Class IV
$13.60
$13.00
$12.90
$12.80
-
-
-
-
-
-
-
-
Butter Futures
-
$1.643
-
$1.585
-
-
$1.540
-
$1.540
-
$1.540
-
MILC pmt.
-
-
-
-
-
-
-
-
-
-
-
-
Source: Actual MILC Payment from http://www.fmmone.com/Northeast_Order_Prices/MILC%20calculator/DMLP.htm

Current USDA Milk Price Forecasts
09/16/05
1st Q 2005
2nd Q 2005
3rd Q 2005
4th Q 2005
Class III Price
$14.31
$14.10
$13.80 to $14.00
$13.40 to $13.90
Class IV Price
$12.64
$12.40
$13.20 to $13.50
$12.90 to $13.50
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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