Missouri Dairy Business Update  
Volume 9, Number 8
August 2009

Milk Prices

According to Bob Cropp's Dairy Outlook, "Improved dairy product prices, with the exception of butter, also means improved milk prices. The July Class III price was just $9.97 and will be near $11.20 for August. The Class IV price was $10.15 in July and will be around $10.50 for August. Prices will continue to improve for the months ahead. Milk production should start to drop below year ago levels in August and continue this decline for the remainder of the year and into 2010 as cow numbers decline and the increase in milk per cow remains below normal. Also, the third CWT round this year will remove close to another 87,000 cows this fall. The opening of schools will increase the quantity of milk needed for fluid consumption. As fall approaches cheese buyers will begin to build inventory for seasonal sales this fall and early winter. Yet dairy futures continue to show modest increases in prices. Class III futures remain below $13.00 for September, only reaching $13.05 for October, ending the year at just $13.40 and don’t reach $14.00 until June of next year. I remain more optimistic than this with Class III over $14.00 by December. However, milk production needs to show declines below year ago levels for this to happen. The Class III price needs to get closer to $16.00 before dairy producers experience favorable returns over operating costs. This may not happened much before the start of the second half of 2010."

Milk Futures on the Chicago Mercantile Exchange
Aug Sept Oct Nov Dec Jan 10 Feb Mar Apr May
Class III $11.20 $12.45 $12.75 $12.97 $13.11 $13.46 $13.69 $13.75 $14.23 $14.35
Class IV $10.51 $11.06 $11.31 $11.43 $11.81 $12.33 $12.37 $12.47 $12.47 $12.57
Butter Futures $1.21 $1.18 $1.22 $1.24 $1.26 $1.29 $1.31 $1.32 $1.33 $1.34

Current USDA Milk Price Forecasts
3rd Q 2009 4th Q 2009 1st Q 2010 2nd Q 2010
Class III Price $10.84 to $11.14 $11.53 to $12.13 $12.39 to $13.29 $13.24 to $14.24
Class IV Price $10.44 to $10.84 $10.64 to $11.34 $11.18 to $12.18 $12.07 to $13.17
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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