Missouri Dairy Business Update  
Volume 8, Number 8
August 2008

Milk Prices

According to Bob Cropp's Dairy Outlook, "Increases in milk production will likely continue at a slower rate through last quarter of this year and for 2009. Lower milk prices and high feed costs this fall and winter are likely to reduce the average total number of milk cows in 2009. Weekly dairy cow slaughter has been running higher than a year ago. While dairy cow slaughter through the week ending July 26th was just 2.6%
higher than a year ago, in recent weeks dairy cow slaughter has been up as much as 18%. Also CWT will be removing cows this fall. While 2008 milk production will total about 2% more than 2007, milk production may increase only 1% or less in 2009. This slower growth in milk production will add strength to milk prices. But this will be partially offset by also a slower growth in domestic as well as international sales of milk and dairy products. Slower growth in the economy along with higher food, gas and home heating prices this winter will dampen domestic sales. Some strengthening of the U.S. dollar and increased milk production in New Zealand and Europe as well as a slower growth in the world economy may slow the growth in dairy exports. Nevertheless, while milk prices are likely to average lower in 2009 than 2008, the
base milk price is still likely to average above $17.00."

Milk Futures on the Chicago Mercantile Exchange
Aug Sept Oct Nov Dec Jan 09 Feb Mar Apr May
Class III $17.20 $15.98 $16.34 $16.65 $16.84 $16.70 $16.81 $16.95 $17.15 $17.18
Class IV $17.10 $16.55 $16.90 $16.35 $16.00 $16.00 $16.00 $16.00 $16.00 $16.00
Butter Futures $1.57 $1.59 $1.60 $1.59 $1.57 $1.56 $1.55 $1.56 $1.57 $1.58

Current USDA Milk Price Forecasts
3rd Q 2008 4th Q 2008 1st Q 2009 2nd Q 2009
Class III Price $17.53 to $17.83 $17.29 to $17.89 $16.96 to $17.86 $17.17 to $18.17
Class IV Price $16.67 to $17.07 $16.85 to $17.55 $16.38 to $17.38 $15.62 to $16.72
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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