Milk Prices

According to Bob Cropp's Dairy Outlook, "Despite a continuation of relatively strong milk production and high stocks of dairy products current and future milk prices remain strong. The December Class III price was $13.47, the highest price for the year, resulting in an $11.89 average Class III price for the year. The January 2007 Class III price was $13.56 and is projected to be much higher for the remainder of the year.
The February Class III price should be about $14.25. CME Class III futures prices increase from February on reaching more than $15.00 by July and peaking in September near $15.50 with an average for the year of about $14.85. In fact Class III futures stay well above $14.00 for all of 2008, averaging in the high $14.00s for the year. Can we expect these much improved milk prices to become reality?

Other factors that will help to support these higher milk prices in 2007 are: A smaller increase in milk per cow due to a milk-feed price ratio below 3:00, the result of higher corn, hay and soybean prices as well as some feed quality problems and reduced use of rBST. A decline in cow numbers by the second half of 2007 as cow slaughter runs higher than a year earlier and the fourth round of CWT being implemented. An expected continued good growth in commercial disappearance will also add support. But, despite these factors it may be a little optimistic to assume current CME Class III futures prices will hold this high through 2008."