Missouri Dairy Business Update  
Volume 8, Number 10
October 2008

Milk Prices

According to Bob Cropp's Dairy Outlook, "While milk production is now increasing less than 2% over last year, the weakening of farm milk prices is the result of softening of both domestic sales and exports of dairy products. Relatively high retail dairy food prices and gas prices along with the economic down turn is hurting
beverage milk and dairy product sales. January through August exports were well above year ago levels. Butter exports were about 500% higher, cheese 48% higher and nonfat dry milk (skim milk powder) up over 80%. But, with expected milk production recovery in New Zealand and Australia, some increase in milk production over a year ago in the EU, the strengthening of the dollar and a world economic down turn world dairy product prices are declining. As a result, interest in dairy exports from the U.S. is also slowing.

High feed prices and lower milk prices will reduce the size of the dairy herd in 2009 as well as increases in milk per cow. Milk production may increase by no more than 1% over that of 2008. But, a slower growth in domestic milk and dairy product sales as well as lower dairy exports during 2009 will result in lower milk prices for 2009. At this time both Class III and Class IV futures for all of 2009 are $2.00, $3.00 or more dollars below comparable monthly 2008 prices."

Milk Futures on the Chicago Mercantile Exchange
Oct Nov Dec Jan 09 Feb Mar Apr May Jun July
Class III $16.99 $15.80 $14.61 $14.46 $14.35 $14.38 $14.76 $14.92 $15.38 $15.50
Class IV $15.40 $13.50 $13.00 $12.80 $12.75 $12.80 $13.25 $13.25 $13.75 $14.25
Butter Futures $1.71 $1.67 $1.50 $1.50 $1.48 $1.49 $1.50 $1.50 $1.50 $1.51

Current USDA Milk Price Forecasts
4th Q 2008 1st Q 2009 2nd Q 2009 3rd Q 2009
Class III Price $16.24 to $16.64 $16.84 to $16.54 $15.81 to $16.81 $15.92 to $16.92
Class IV Price $14.03 to $14.53 $12.94 to $13.74 $12.54 to $13.64 $12.76 to $13.86
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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