Missouri Dairy Business Update  
Volume 9, Number 10
October 2009

Milk Prices

According to Robert Cropp's Dairy Outlook, "The recovery of farm milk prices continues. The Class III price for October will be around $12.80 compared to $9.97 back in July. The Class IV price will be around $11.60 compared to $10.15 last July. These higher prices are driven by improvements in cheese, dry whey, and nonfat dry milk and butter prices. These improved prices are being driven by both the supply of milk and dairy products, and improved demand.

In summary, milk prices will continue to improve this year and for 2010. As of October 20th, Class III dairy futures were $14.64 for December and improved to $15.42 for July 2010. But, I believe the odds are that prices could do better than this with December above $15, and $16.00 or higher by July 2010.

MILC payments will decline as milk prices increase and lower feed costs, mostly due to lower hay prices, reduces or eliminates the feed adjuster to the target price. Preliminary September prices for Corn (3.32 per bushel) soybeans ($9.85 per bushel) and hay ($110 per ton) means the cost for a 16% dairy ration is $6.59 per 100 pounds, well below the trigger of $7.35 for a feed adjustment to the target price. The preliminary MILC payment for September is $1.24 per hundredweight and payments may disappear by December."

Futures on the Chicago Mercantile Exchange
10-29-09
Oct Nov Dec Jan 10 Feb Mar Apr May June July
Class III Milk (per cwt.)
$12.78 $13.80 $14.71 $14.80 $14.88 $15.13 $15.12 $15.23 $15.25 $15.37
Class IV Milk (per cwt.)
$11.65 $12.78 $13.25 $13.36 $13.49 $13.37 $13.62 $13.46 $13.71 $13.91
Butter (per lb.)
$1.22 $1.35 $1.38 $1.41 $1.42 $1.43 $1.44 $1.44 $1.46 $1.46

Current USDA Milk Price Forecasts
10-16-09
4th Q 2009 1st Q 2010 2nd Q 2010 3rd Q 2010
Class III Price $12.46 to $12.86 $12.58 to $13.28 $13.28 to $14.28 $14.51 to $15.51
Class IV Price $11.42 to $11.92 $11.31 to $12.11 $11.94 to $13.04 $12.39 to $13.49
Source: USDA, ERS, Livestock, Dairy & Poultry Outlook


Historical Missouri milk prices may be found at: http://agebb.missouri.edu/dairy/mkt/index.htm



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