Missouri Dairy Business Update  
Volume 9, Number 5
May 2009

Milk Prices

According to Bob Cropp's Dairy Outlook, "Cheese prices and milk prices should start to show some improvement starting in June and continue to improve as the year progresses. But, there is disagreement as to how much prices will improve. Currently, Class III futures don’t reach $13.00 until August, $14.00 until September and only $14.90 in December. Despite the announcement that CWT will be removing close to 103,000 cows between the end of May and the end of July, Class III futures have declined since the announcement. Milk production needs to fall below year ago levels before milk prices will show significant increases. The reason is slower domestic sales and the big decline in dairy exports. Until prices improve financial stress on dairy farmers will continue. U.S. alfalfa hay price at $133 per ton is 17% lower than a year ago. But while also lower than a year ago, corn and soybean prices are still relatively high. Returns over feed costs are still negative for some producers and low for all others. As a result, milk production should start to fall below year ago levels as cow numbers continue to decline and milk per cow remains well below more normal increases. And with lower wholesale and retail dairy product prices some improvement in dairy
product sales should occur. As a result, I still feel prices could improve more than what the futures market is currently indicating."

Milk Futures on the Chicago Mercantile Exchange
May Jun July Aug Sept Oct Nov Dec Jan 10 Feb
Class III $9.83 $10.31 $11.35 $12.67 $13.80 $14.38 $14.83 $14.97 $15.08 $14.92
Class IV $10.10 $10.65 $11.00 $11.42 $11.72 $11.90 $11.93 $11.95 $11.98 $13.43
Butter Futures $1.22 $1.26 $1.31 $1.33 $1.35 $1.37 $1.39 $1.41 $1.43 $1.45

Current USDA Milk Price Forecasts
2nd Q 2009 3rd Q 2009 4th Q 2009 1st Q 2010
Class III Price $9.99 to $10.29 $10.54 to $11.14 $11.61 to $12.51 $12.01 to $13.01
Class IV Price $9.73 to $10.13 $10.07 to $10.77 $10.64 to $11.64 $11.31 to $12.41
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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