By Jean Caspers-Simmet
simmet@agrinews.com
DUBUQUE, Iowa — After record high milk prices in 2007, prices are down for 2008 and will be even lower in 2009, says Robert Cropp, dairy marketing economist and professor Emeritus at the University of Wisconsin-Madison.
He spoke at last week’s Tri-State Agricultural Lenders Conference in Dubuque.
"I’m not a bearer of good news," Cropp said. "There’s a difference of opinion as to how much lower prices will be, but clearly milk prices are very volatile and producers need to manage price risk."
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High feed prices and lower milk prices are impacting milk production, Cropp said. Cow slaughter was up 4.1 percent from January to September. The cow herd is still 1.1 percent higher in September than a year ago.
Increases in milk per cow have slowed. The trend had been 2 percent per year the past 10 years. This year it’s been about 1 percent and September was just 0.6 percent.
USDA projected feed costs for September were up 44.2 percent from a year ago. Corn and soybean prices have dropped, but the estimate for October is still 29 percent above last year.
For 2009, the annual increase in milk per cow will be about 1.4 percent. Total milk production will be up 1 percent for the year.
A bright spot is organic milk sales, up 19.4 percent from 2007 for whole milk and 13.7 percent for organic fat-reduced milk.
Dairy exports held prices up in 2008, Cropp said, but exports will cool in 2009 due to a slowing world economy, lower world dairy prices and a stronger U.S. dollar.
Cropp forecasts Class III prices for 2009 to be $14.40 to $14.89 per hundredweight for January to March; $14.40 to $14.92 for April to June; $15.74 to $16.23 for July to September; and $16.96 to $17.44 for October to December. Annual average Class III price is estimated to be $17.51 for 2008 and $15.38 to $15.87 for 2009.
