Ag Notes: Dairy farmers looking for improved prices in 2004

December 30, 2003|JERRY LITTLE

After a year of below-average milk prices, Kentucky dairy farmers hope next year will be easier on their pocketbook.

The U.S. Department of Agriculture projects that 2004 milk prices will be similar to 2003. Let's hope they are wrong.

The futures prices indicate Kentucky farmers can expect $13.50 to $14 per early in 2004. Kentucky milk price should rise above $14 next summer and peak at more than $15 by September. On average, Kentucky farmers get about $2 above the Class III milk futures price. Class III milk is used primarily for cheese.

There are reasons for optimism. For one thing, dairy product sales improved the last half of 2003.

Another cause for optimism is the continuing decline of milk cow numbers.

Because the United States has closed the Canadian border to cattle, cull cow slaughter are higher. The result has been dairy cow slaughter prices running nearly 11 percent higher than a year ago.


Milk production per cow has been erratic but probably will return to normal trends in 2004. If early 2004 prices go back to the levels of early 2003 as predicted, market adjustments leading to stronger prices could start to make a difference by late 2004.

Total U.S. milk production for 2003 is forecast to be 170.3 billion pounds, which is slightly higher than the 169.8 billion pounds in 2002. Projections for 2004 production show an increase of just over 1 percent at 172.3 billion pounds. This is mainly due to increased production per cow.

Many producers will look at the future predictions and begin to wonder if they should lock in their milk price for the first half of 2004. Some dairy producers look for opportunities to do just that for the first six months of the year.

The reason is because milk future prices for the first half of 2004 are above the five-year average prices. Before locking in their milk price, however, farmers should know how much their pay price averages above Class III milk price and their cost of production is.

Farmers are encouraged to visit a helpful site on the Internet at:

There is an excellent hedging opportunity graph on this site that will help farmers make decisions regarding the best way to use the futures market.

Jerry Little is Boyle County extension agent for agriculture and natural resources.

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