Missouri Dairy Business Update  
Volume 7, Number 10
October 2007

Milk Prices

According to the Bob Cropp's Dairy Outlook, "As milk production continues to increase both seasonally and compared to year ago levels, we can expect milk prices to decline for the remainder of the year. With the high milk prices experienced thus far milk cow numbers will likely stay above year ago levels and into 2008. Milk per cow is likely to continue to increase around 1.5% or more. While corn prices may stay below year ago levels, much higher soybean prices and hay prices with keep feed costs high and this could well dampen increased in milk production this winter. For the U.S., alfalfa hay prices for September were 21.6% higher than a year ago with California experiencing a 44.4% price increase. Later commercial disappearance reports will likely show that the high wholesale and retail prices of dairy products no doubt did slow sales. This combination of milk production and dairy product sales will lower milk prices, but yet prices will stay relatively high historically.

Respectively, the September Class III and Class IV prices were $20.07 and $21.61. For October, Class III will be around $18.45 and Class IV still near $21.00. By December, Class III may fall to around $17.00 or even a little below, but Class IV may stay well above $19.00. For 2008, Class III will continue to fall during the first half of the year, but may stay above $15.00. Class IV could stay above $17 and will remain as the mover of Class I prices. For all of 2007, the Class III price will average around $17.60, breaking the previous record of $15.39 set in 2004. The average All Milk Price will be near $19.00, also breaking the previous record of $16.05 set in 2004."

Milk Futures on the Chicago Mercantile Exchange
Oct Nov Dec Jan 08 Feb Mar Apr May June July
Class III $18.57 $18.30 $17.45 $16.54 $16.08 $15.94 $15.82 $15.72 $15.77 $15.87
Class IV $21.15 $20.30 $19.80 $19.35 $18.80 $19.00 $18.25 $17.90 $17.92 $17.50
Butter Futures $1.30 $1.30 $1.31 $1.34 $1.37 $1.41 $1.43 $1.43 $1.46 $1.49

Current USDA Milk Price Forecasts
4th Q 2007 1st Q 2008 2nd Q 2008 3rd Q 2008
Class III Price $18.03 to $18.43 $16.98 to $17.68 $15.66 to $16.66 $14.95 to $15.95
Class IV Price $21.08 to $21.58 $19.40 to $20.20 $17.18 to $18.28 $16.30 to $17.40
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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