Missouri Dairy Business Update  
Volume 8, Number 5
May 2008

Milk Prices

According to the Bob Cropp's Dairy Outlook, "Class III futures are above $20 June 2008 through December of this year and above $19.00 January through March of 2009 and beyond that through April of 2010 above $18.00. These prices may or may not come true. Market prices continue to surprise many price forecasters. Much higher feed costs resulting in much higher milk production costs per hundredweight is partially credited for a slower response by dairy producers to favorable milk prices in increasing milk production. But, despite higher feed costs, if farm milk prices do result as the futures market is now showing, there will be profitable returns to dairying. Dairy producers in the nation as a whole do respond to milk prices received in relation to costs of production. As previously indicated, with the beginning of May of last year each month dairy producers have added milk cows. Unless milk prices do decline to a Class III price of about $16.00 cow numbers are likely to continue to increase and milk production is likely to continue to increase at a rate of at least 2%. Milk prices can hold if commercial disappearance also grows 2 percent or more. But, if the economy continues to slow and gas and food prices continue to increase, we can expect some slow down in consumer demand for milk and dairy products. Some of this slow down may be offset by expected continued favorable exports of butter, nonfat dry milk, dry whey and cheese.

But, all said and done, the chances of Class III prices for the remainder of this year and going into 2009 and beyond holding at current Class III futures prices is less than prices turning out lower."

Milk Futures on the Chicago Mercantile Exchange
May June July Aug Sept Oct Nov Dec Jan 09 Feb
Class III $18.18 $20.69 $21.24 $21.13 $21.00 $20.57 $20.45 $20.35 $19.80 $19.24
Class IV $15.40 $16.35 $16.95 $17.25 $17.35 $17.50 $18.00 $17.90 $17.10 $17.20
Butter Futures $1.42 $1.46 $1.49 $1.49 $1.51 $1.53 $1.53 $1.55 $1.56 $1.56

Current USDA Milk Price Forecasts
2nd Q 2008 3rd Q 2008 4th Q 2008 1st Q 2009
Class III Price $17.14 to $17.44 $16.48 to $17.08 $16.40 to $17.30 $16.53 to $17.53
Class IV Price $14.87 to $15.27 $15.62 to $16.32 $16.51 to $17.51 $16.33 to $17.43
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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