Missouri Dairy Business Update  
Volume 7, Number 11
November 2007

Milk Prices

According to the Bob Cropp's Dairy Outlook, "The production data clearly show that dairy producers have responded to very favorable milk prices by increasing milk cow numbers. The increase in cow numbers are the result of keeping lower producing cows that normally would be slaughtered in the herd longer and bringing in more replacements. Cow slaughter, which was running 10 to 15% higher for the first half of the
year, fell below or only slightly higher since then. In recent weeks slaughter numbers have increased some running about 5% higher. High feed costs and tighter winter supplies of quality hay may keep slaughter numbers higher this winter. The July 1st cattle inventory showed that dairy herd expansion is possible with replacement numbers 2.6% higher than a year ago.

High feed prices, high prices for dairy replacements and dairy producers still recovering from low milk prices and high feed costs that existed in 2006 all may dampen increases in 2008 milk production. High retail milk and dairy product prices have dampened demand some, but over-all sales remain favorable, plus continued exports of nonfat dry milk and dry whey, as well as some increase in cheese and butter exports, will help to
support milk and dairy product prices. So at this time sharp declines in cheese prices and milk prices are not anticipated. However, Class III prices could well be below $17.00 by January and in the low $15.00s by May before showing some seasonal strength. There are now opportunities for producers to protect favorable milk prices for all of 2008 since Class III futures are still more optimistic than this."

Milk Futures on the Chicago Mercantile Exchange
11-20-07
Nov Dec Jan 08 Feb Mar Apr May June July Aug
Class III $19.20 $19.82 $18.42 $17.42 $16.85 $16.20 $16.03 $16.08 $16.12 $16.24
Class IV $20.45 $19.90 $19.25 $18.65 $18.90 $18.05 $18.00 $18.00 $17.60 $17.50
Butter Futures $1.31 $1.39 $1.41 $1.45 $1.50 $1.50 $1.49 $1.48 $1.54 $1.51

Current USDA Milk Price Forecasts
11-20-07
4th Q 2007 1st Q 2008 2nd Q 2008 3rd Q 2008
Class III Price $18.56 to $18.86 $17.27 to $17.87 $15.81 to $16.71 $15.05 to $16.05
Class IV Price $21.08 to $21.58 $19.41 to $20.11 $17.23 to $18.23 $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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