Milk Prices - Wow!

Class III and Class IV milk futures prices have exploded in recent days.. The speed of this upward movement suggests commercial users covering inventory needs for the rest of the year as well as speculators jumping on the market for the upward ride.

If the current futures accurately predict the rest of the year, by midsummer the Class I or fluid milk prices in Missouri will be more than $22.00, making for some nice milk checks, especially in Southern Missouri where the Class I utilization often runs over 55% in the summer.

According to the USDA's Dairy Outlook, "The tightening milk supplies are encountering continued demand growth. The commercial disappearance of all milk and dairy products was up 4.4 percent for the November through January period compared with a year earlier. Meanwhile, milk production rose 2.4 percent during the same period. Prices for cheese and butter have remained strong, and February stock levels for American cheese and butter were unchanged and 10 percent higher respectively, according to the March Cold
Storage report."

According to Bob Cropp's Dairy Outlook, "Milk production growth continues to slow from the 2% even 5% monthly increases from the previous year during 2006. This has been a major factor in strengthening milk prices this year. Compared to year earlier, March milk production for the 23 reporting states was up 1.1 percent. Milk cows were 0.7% more than a year ago, but a continued low increase in milk per cow of just 0.4% held down the increase in total milk production.

In summary, all factors point to much higher milk prices for all of 2007 offsetting some of the higher feed prices. But, it is still uncertain whether cheese and dry whey prices will hold at levels that will allow current Class III futures prices to materialize. But, also if summer weather is unfavorable to milk production, prices this summer and early fall could be even high. Higher prices may result in some demand resistance similar to what occurred with record high prices in 2004."