Missouri Dairy Business Update  
Volume 7, Number 8
August 2007

Milk Prices

According to the USDA's Dairy Outlook, "The greater availability of milk, both for the balance of 2007 and into 2008, is expected to moderate prices, but precipitous declines from 2007 price levels are unlikely next year. Robust demand, both domestically and, especially, internationally, will keep prices high. Sales of fluid milk through April have been about 2 percent above previous year’s levels in Federal Market Order areas and California. This represents a change in the downward trend of recent years. Low fat and skim milk product consumption has grown faster than whole milk. Organic milk sales have climbed at double-digit rates, albeit from a small base. Higher prices at retail could limit gains for the balance of the year, making more milk available for manufacturing."

Dairy Exports

According to Bob Cropp's Dairy Outlook, "Milk prices are driven by dairy product prices. The Class III price is driven by the price of butter, cheddar cheese and dry whey. The Class IV price is driven by the price of nonfat dry milk and butter. With the latest USDA milk production report showing cow numbers increasing and a relatively strong increase in milk production, farm level milk prices likely peaked for the year in July. While Class III and Class IV prices will decline, the both Class III and Class IV futures prices still offer dairy producers an opportunity to protect relatively favorable milk prices. Dairy cooperatives and other milk plants also offer favorable forward price contracts.

Milk Futures on the Chicago Mercantile Exchange
Oct Nov Dec Jan 08 Feb Mar Apr May
Class III $19.83 $19.95 $19.33 $18.13 $17.41 $16.34 $15.75 $15.56 $15.50 $15.45
Class IV $21.60 $21.00 $19.60 $19.45 $18.50 $17.45 $17.20 $17.10 $17.20 ----
Butter Futures $1.46 $1.45 $1.47 $1.47 $1.48 $1.52 $1.48 $1.51 $1.53 $1.54

Current USDA Milk Price Forecasts
3rd Q 2007
4th Q 2007 1st Q 2008 All 2008
Class III Price $20.57 to $20.87 $19.05 to $19.65 $17.49 to $18.39 $16.40 to $17.40
Class IV Price $21.31 to $21.71 $20.43 to $21.13 $18.85 to $19.85 $17.45 to $18.55
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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