Missouri Dairy Business Update  
Volume 9, Number 2
February 2009

Milk Prices

According to Bob Cropp's Dairy Outlook, "With cow numbers starting to decline and milk per cow well below trend, farm milk prices ought to improve as we progress through the year. By 2nd quarter Class III prices may improve to $10.85 to $11.90 and the U.S. All Milk Price to $11.85 to $11.90. By 3rd quarter Class III may be $12.45 to $13.60 and the All Milk Price $15.25 to $15.75. And by the 4th quarter Class III $14.25 to $14.75 and the All Milk Price $15.25 to $15.75. However, USDA’s latest price projections are not quite this optimistic. Whether prices end up lower or higher than this is not certain, but prices will improve the second half of the year. History clearly tells us that milk prices are very sensitive to rather small changes in milk production and/or sales. Other activities may also occur to help price recovery such as the CWT dairy export program, another and perhaps larger CWT herd reduction program, and USDA purchases of dairy products for domestic and international feeding programs. So let’s hope that prices by the second half of the year end up better than what are now projected."

To put in some perspective on historical price recovery, the following graphic depicts the historical milk price recovery after the lowest class III price hits in various years.

Months after the Lowest Class III Price Hits


Milk Futures on the Chicago Mercantile Exchange
Feb 09 Mar Apr May Jun July Aug Sept Oct Nov
Class III $9.28 $10.23 $10.35 $10.86 $11.49 $12.61 $13.37 $13.89 $14.05 $14.47
Class IV $9.70 $10.05 $10.40 $10.70 $10.90 $11.00 $11.08 $11.60 $11.44 $11.90
Butter Futures $1.08 $1.12 $1.16 $1.21 $1.24 $1.27 $1.29 $1.32 $1.35 $1.36

Current USDA Milk Price Forecasts
1st Q 2009 2nd Q 2009 3rd Q 2009 4th Q 2009
Class III Price $9.51 to $9.81 $8.89 to $9.49 $9.55 to $10.45 $10.94 to $11.94
Class IV Price $9.23 to $9.63 $8.94 to $9.64 $9.29 to $10.29 $9.94 to $11.04
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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