Missouri Dairy Business Update  
Volume 6, Number 10
October 2006

Milk Prices

According to Bob Cropp's October Dairy Outlook, "The nation’s cow herd will likely continue to decline slowly in the month’s ahead. Dairy cow slaughter has increased in recent weeks being 10 to 13% higher than year ago. But, ample number of dairy replacements lessens the decline in cow numbers. Milk per cow may improve, but could stay below the normal 2% annual growth. Forecasts are for higher corn and hay prices which could keep the milk-feed price ration below 3.0 for the winter months.

The September Class III price was $12.29, the first time above $12.00 since $12.20 in February.
The October Class III price will be about the same, but unless cheese prices can recover some,
the November and December Class III prices could be lower and close to $12.00. The relatively
high dry whey price helps significantly to boast the Class III price. As we look ahead into 2007
the probability is high for milk prices to average higher than 2006 for the first half of the year
and considerably better for the last half of the year."

2006 Milk Futures on the Chicago Mercantile Exchange
10-20-06
Oct Nov Dec Jan 07 Feb Mar Apr
May
Jun
July
Aug
Sep
Class III $12.32 $12.89 $13.00 $13.15 $13.10 $13.15 $13.25 $13.25 $13.35 $13.93 $14.25 $14.42
Class IV $11.40 $11.60 $11.40 -- -- -- -- -- -- -- -- --
Butter Futures $1.30 $1.35 $1.32 $1.34 $1.36 $1.40 $1.40 $1.40 $1.40 $1.41 $1.41 $1.43

Future MILC estimates may be derived from the following formula:
($13.69 - (Higher of Class III or IV price) *$0.34)
MILC-X Fact Sheet, Payment Calculations, and USDA Details are available at http://www.fsa.usda.gov/FSA/webapp?area=home&subject=prsu&topic=mpp-mi

Current USDA Milk Price Forecasts
10-19-06
4th Q 2006
1st Q 2007
2nd Q 2007 3rd Q 2007
Class III Price $11.78 to $12.18 $11.59 to $12.29 $11.81 to $12.81 $12.61 to $13.61
Class IV Price $11.08 to $11.58 $10.45 to $11.25 $10.24 to $11.34 $10.55 to $11.65
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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