Milk Price Outlook

Cameron Thraen, Dairy Economist

The announced Basic Formula Price (BFP) for the month is $16.84 per cwt. for milk testing 3.5 percent butterfat. This price is up to $0.80 over the last month price and $3.88 higher than a year earlier. With weakening butter prices, the current butterfat differential is 17.8 cents. A year earlier the butterfat differential was 16.7 cents. Remember the current BFP is equal to the base month M-W price @ 3.5 of $16.26 plus a butter/powder/cheese price adjustment from August to September of $0.58. This adjustment is primarily a result of continued strong cheese price increases this fall. The USDA reports that milk production across the U.S. continues strong for this time of year.

The key factors influencing the BFP price over the next couple of months will be the growth in production and the demand in the cheese market. The current CME cheese price has remained at the 1.90 level and may have reached a plateau. The seasonal break for schools will leave milk looking for an outlet and this could translate into a turn down in cheese prices. If so, November may be the peak for the BFP this year. We will have to wait and see what happens with holiday demand.

All CME BFP contracts out through June traded down on December 11th. The December contract settled at $16.20, off 10 cents from the day before. The January BFP contract closed at $16.17, off 26 cents. In the product markets, block cheese prices were steady at $1.90 and the AA butter price was down at $1.3950. Grade A nonfat dry milk was trading at 1.5550, trading down from a week ago