Milk Price Outlook

The announced Basic Formula Price (BFP) for the month is $16.04 per cwt. for milk testing 3.5 percent butterfat. This price is up $0.94 over the last month price and $3.21 higher than a year earlier. The current butterfat differential for is 27.3 cents. A year earlier the butterfat differential was 15.3 cents. Keep in mind that the BFP is equal to the base month M-W price of $15.18 plus a butter/powder/cheese price adjustment from August to September of $0.86. This adjustment is primarily a result of a strong cheese price increase from August to September.

The important news from the latest numbers is that milk production, milkfat and protein levels are up in most areas of the nation. Milk cow numbers continue strong. In the 20 reporting states there are only 3,000 fewer cows than one year earlier. Back in January there where 57,000 less milk cows than one year earlier. Record milk prices over the coming months, low feed costs and low cull cow prices will continue to contribute to seasonal increases in milk production.

The November 17th BFP contract on the CME closed at $16.73 and the December BFP contract closed at $16.55. In the product markets, block cheese prices were steady at $1.8625 and the AA butter price was down at $1.75. Grade A nonfat dry milk was unchanged at $116.50. The good news is that strong cheese prices for November provide an indication that the November BFP to be announced December 4th will be another record milk price.