Missouri Dairy Business Update  
Volume 8, Number 3
March 2008

Milk Prices

According to the Bob Cropp's Dairy Outlook, "Class III prices from April to July of $16.00 plus now seem reasonable. With some strengthening or cheese prices and dry whey prices by late summer and fall, a $17.00 Class III is quite possible by September and October. At this time Class III futures is showing such a pattern. But, any major changes in milk production, growth domestic sales or dairy exports can change the milk price outcome."

According to the USDA Dairy Outlook, "Milk production is forecast to rise 2.7 percent in 2008 over 2007, reaching 190.7 billion pounds. The increase comes as cow numbers are forecast to rise about 1 percent in 2008. Feed prices continue to rise above year-earlier levels, and are expected to do so for the remainder of 2008. However, those producers who have expansion plans underway will continue to implement them. According to the Livestock Slaughter report, January dairy cow slaughter was very near last year’s level. Many farmers in the upper Midwest produce much of their feed on farm and are somewhat insulated from rising feed prices. The impetus for expansion continues in the West because of the lengthy process of obtaining permits. Once current expansion is complete, the process may slow because permits are becoming
difficult to obtain, especially in California. Milk production per cow is projected to rise by less than 1 percent on a daily basis, well below the trend of the previous 2 years. Reduced feeding intensity is the short-term response to higher feed prices. Milk-feed ratios are expected to be weaker during 2008. Lower returns in mid-2008 may point toward contraction in the herd by late 2008."

Milk Futures on the Chicago Mercantile Exchange
Mar 08 Apr May June July Aug Sept Oct Nov Dec
Class III $17.98 $16.90 $17.12 $17.40 $17.55 $17.73 $17.88 $17.68 $17.69 $17.65
Class IV $14.20 $14.78 $14.50 $15.40 $15.90 $16.20 $16.10 $16.14 $16.35 $16.35
Butter Futures $1.26 $1.37 $1.38 $1.40 $1.43 $1.44 $1.46 $1.47 $1.49 $1.49

Current USDA Milk Price Forecasts
1st Q 2008 2nd Q 2008 3rd Q 2008 4th Q 2008
Class III Price $17.99 to $18.19 $16.48 to $16.98 $15.49 to $16.29 $14.63 to $15.63
Class IV Price $14.88 to $15.18 $14.16 to $14.76 $14.86 to $15.76 $15.91 to $17.01
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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