Christensen Sales Corp.



Wisconsin Ag News Headlines
Dairy Situation & Outlook Report Foresees Lower Milk Prices Ahead
Wisconsin Ag Connection - 11/25/2008

It looks like milk prices are not forecasted to improve for the rest of the year and could go even lower during the next six months. That's according to Dr. Bob Cropp, professor emeritus with the University of Wisconsin Cooperative Extension. In his monthly Dairy Situation and Outlook report, Cropp says milk prices are trending much lower than a year ago due to lower cheese, dry whey and nonfat dry milk prices.

"The October Class III price was $17.06 and will decline in November to around $15.55, nearly $3.70 lower than a year ago," Cropp said in the report. "The Class IV price was $13.62 for October and will be around $13.50 for November, about $6.90 lower than a year ago. "

Looking at the numbers, Cropp says CME butter prices which were $1.75 per pound mid-October are now $1.62 per pound and are expected to decline shortly as Christmas orders are filled. CME 40-pound cheddar blocks which were as low as $1.605 per pound the beginning of November have improved to $1.76 per pound. CME cheddar barrels were $1.685 per pound the beginning of November and have improved to $1.73 per pound. Cheese prices are also expected to decline once holiday orders are filled. Dry whey which was $0.44 per pound a year ago is now in the $0.15 to $0.18 range.

"This is lower than the make allowance in the Class III federal order formula resulting in a negative other solids price per pound," he said. "In response to low prices the production of dry whey was down 5.1% in September from a year ago. This lower dry whey price from a year ago explains about $1.70 of the lower Class III price."

Meanwhile, lower milk prices are not being driven by a lot more milk being produced. Cropp says USDA's estimate for October showed milk production just 1.2% more than a year ago, and monthly increases in milk production have been below 2% since July and the October increase is the lowest this year.

"The relatively smaller increase in milk production is the result of below normal increases in milk per cow," Crop notes. "October cow numbers were the same as September, but down 15,000 head from the July peak and were still 1.0% higher than a year ago. October milk per cow was just 0.3% higher than a year ago. High feed costs and reduced use of rBST are contributing factors to smaller increases in milk per cow."

While increases in milk production are not relatively high a slow down in domestic milk and dairy product sales and dairy exports are to blame for lower milk prices. Economic troubles in the U.S. economy is hurting domestic sales. A slow down in the world economy, the strength of the U.S. dollar and more product available has lowered world dairy product prices and reduced the interest in further dairy exports from the U.S. Tight credit polices to pay for imports in some importing countries is also hurting U.S. exports. Fluid milk sales January through September compared to a year earlier were down 0.5%. American cheese sales are only about 1% higher and other cheese types, mainly Italian cheeses are almost 2% lower.

"The exception has been good butter sales," Cropp says. "But, slower restaurant traffic is hurting cheese sales."

While corn and soybean prices have weakened they are still well above recent year prices. Hay prices are well above a year ago. Thus, milk production costs are higher and as of now dairy futures do not offer prices that allow dairy farmers to protect favorable margins.


Other Wisconsin Headlines
Ag-Bag
Professional Dairy Producers Foundation
Copyright © 2024 - Farms.com. All Rights Reserved.