Milk Prices

According to Bob Cropp's Dairy Outlook, "We know that as milk production continues to slow that dairy product prices and milk prices will improve. But, the recovery appears to be very slow. Opinions as to how much improvement by year end varies. With the sensitivity of prices to rather small supply and demand changes any of these opinions could be correct.

Due to a sluggish domestic economy and the lost of exports USDA is not overly optimistic for much improvement this year. USDA predicts the following average prices for the year: Class III $10.60 to $11.00, Class IV $10.10 to $10.60, and the All Milk Price $11.95 to $12.35. I still feel prices could do better than this. I could see Class III $13.65 by September and $15.15 by December with an average of $12.10 for the year.

The All Milk Price could be $15.40 by September and $16.45 by December with an average of $13.65 for the year. Current futures prices are in between these estimates. None of these estimates get milk prices to a level for favorable returns over feed and operating costs for dairy producers.

Financial stress dairy producers are currently facing will continue to push down milk production for most of 2010 and result in further improvement in milk prices. But, it could take until the second half of 2010 before prices get to a level for favorable returns to dairy producers. If production slows more than expected, domestic demand and/or exports improve more than expected, or some government action to improve prices is implemented, prices could improve much sooner and that would be very well received."