Missouri Dairy Business Update  
Volume 7, Number 12
December 2007

Milk Prices

According to the Bob Cropp's Dairy Outlook, "The average U.S. All Milk Price for 2007 will set a record at about $19.15, surpassing the previous record of $16.05 set back in 2004 and more than $6.00 higher than the $12.90 average of last year. But, the probability is certain for lower milk prices in 2008. The questions is how much lower? Dairy producers will respond to the past higher milk prices by expanding cow
numbers, at least for the first half of the year. But, high feed prices and normal dairy cow slaughter are likely to dampen increases in herd expansion and total milk production. The milkfeed- price ratio will fall bellow the favorable 3.0 ratio as we move into 2008. High wholesale and retail prices slowed the growth in domestic commercial disappearance of milk and dairy products the last half of 2007 and will likely continue to do so going into 2008. But, anticipated good dairy exports will add to the domestic disappearance. As of now I could see Class III prices averaging about $16.30 for the 1st quarter of 2008, $15.00 for the 2nd quarter, $16.35 for the third quarter and $15.70 for the fourth quarter with an average for the year of about $15.85. Thus, 2008 milk prices may average about $2.00 lower than 2007, but yet be well above recent 5-year averages. Of course changes in milk production, domestic commercial sales or exports can result in prices quite different from this."

Milk Futures on the Chicago Mercantile Exchange
12-19-07
Dec Jan 08 Feb Mar Apr May June July Aug Sept
Class III $20.34 $17.70 $16.96 $16.58 $16.15 $16.10 $16.04 $16.20 $16.37 $16.53
Class IV $19.95 $18.20 $17.55 $17.50 $16.75 $16.70 $16.65 $16.85 $17.25 $17.50
Butter Futures $1.32 $1.34 $1.35 $1.39 $1.42 $1.44 $1.47 $1.50 $1.51 $1.53

Current USDA Milk Price Forecasts
12-19-07
4th Q 2007 1st Q 2008 2nd Q 2008 3rd Q 2008
Class III Price $19.39 to $19.59 $18.58 to $19.08 $16.34 to $17.14 $14.76 to $15.76
Class IV Price $20.30 to $20.60 $18.63 to $19.23 $17.48 to $18.38 $16.73 to $17.83
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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