March 17, 2004 | By: Aimee D. Heald

After nearly two years of record-low prices, Kentucky dairy farmers are finally seeing higher milk prices. 

“The futures price for milk currently is approaching $16.92 per 100 pounds of milk for April,” said Bill Crist, University of Kentucky College of Agriculture dairy specialist.  “That is a record high, $3.83 above the old record of $13.09. May’s futures price is $16.65, $2.82 above the previous record high of $13.83. It has been a long time since dairy farmers experienced anything like this – especially in the spring of a year.”

Milk prices usually are at their lowest in the spring and highest in fall and early winter. 

Crist said dairy farmers have a bright outlook this year basically because of supply and demand.

“Consumption for dairy products was up more than 2 percent in 2003,” he said. “Cheese usage was up more than 2 percent and butter up nearly 1.5 percent.”

Another contributing factor is dairy cow numbers in the United States. Crist said dairy cow numbers are declining on U.S. farms to the tune of 55,000 fewer cows in 2003.  However, milk production per cow is nearly level, up only about 141 pounds in 2003.  The result is nearly the same milk production in 2003 as 2002, he said.

“So with milk supply in the United States level, and demand up, the price of dairy products and the price that dairy farmers receive for their milk is going up,” Crist said.

Some examples of the upward price trend are showing up at the wholesale level.  A year ago wholesale cheese prices were approximately $1.08 per pound; currently the price is up to $1.87 per pound.

Crist said butter price has made a drastic change.

“About a year ago, wholesale butter prices got as low as $1 per pound,” he said.  “There was some strengthening of butter price last fall, but the real explosion in the prices was this winter.”

Currently, wholesale butter price is more than $2 per pound, more than twice as high as a year ago.  Crist said the real question is if butter will hit $2.50 to $3 per pound by the fall. He said indications are that butter supplies cannot be found in the international marketplace.

“Australia and New Zealand usually have butter to export, but not this year,” he said.  “Their butter supply is already committed.”

Crist said now is a good time for dairy farmers to be using the futures market to lock in part of their spring and summer milk prices.


Source: Bill Crist, 859-257-7543