Missouri Dairy Business Update  
Volume 7, Number 3
March 2007

Milk Prices

According to the USDA Dairy Outlook, "Rapidly rising feed prices have continued to raise costs for dairy producers. Corn and soybean meal prices have risen, but probably more important for dairy producers, have been high prices for alfalfa hay. Hay prices are expected to rise further as supplies tighten, but should decline later this year as supplies increase with expected improved conditions this spring. Relief in the form of higher milk prices for 2007 could improve profitability for the most efficient producers."

"Forecast higher prices for dairy products point to significantly higher prices for all milk classes. The Class IV milk price is expected to climb throughout 2007, averaging $12.95 to $13.65 per cwt for the year. The Class III price is projected to rise to an average $14.10 to $14.70 per cwt for the year. The reported all-milk price is expected to be sharply higher in 2007 – it could reach $15.50 to $16.50 per cwt by the fourth quarter and will likely average $15.05 to $15.65 per cwt for the year. "

According to Bob Cropp's March Dairy Outlook, "These much higher prices will continue to be driven by high feed prices, a decline in cow numbers, below normal increases in milk per cow, continue strong exports keeping milk protein prices relatively high and expected continued good growth in commercial disappearance. Both the CWT export assistance program and the recently announced planned to remove 52,000 cows under the fourth round of the hired buyout program add support to these prices."

Milk Futures on the Chicago Mercantile Exchange
Mar Apr
Oct Nov Dec Jan 08 Feb
Class III $14.96 $15.73 $15.53 $15.48 $15.61 $15.97 $16.22 $15.82 $15.60 $15.25 $15.15 $15.03
Class IV $13.60 $13.80 $13.90 $14.00 $15.75 $16.00 $16.10 $16.30 $16.40 $16.50 - -
Butter Futures $1.26 $1.33 $1.34 $1.35 $1.36 $1.37 $1.39 $1.41 $1.42 $1.42 $1.42 $1.44

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
1st Q 2007
2nd Q 2007
3rd Q 2007 4th Q 2007
Class III Price $13.96 to $14.16 $13.96 to $14.46 $14.21 to $15.01 $14.27 to $15.27
Class IV Price $12.68 to $12.98 $13.01 to $13.61 $13.06 to $13.96 $13.07 to $14.17
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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