The Basic Formula Price (BFP) for January was released on February 5th. For January, the BFP was $13.25 per cwt. This is the second month in a row that the BFP has been above $13.00.
Currently, BFP futures contracts for February are trading above $13.00. This trading, along with most analys projections, places the February BFP above $13.00. It's highly likely that we will have 3 months of BFPs above $13.00 per cwt.
BFPs above $13.00 per cwt. will place producer pay prices for milk in the mid to high $14.00 range for both January and February.
High milk prices are occurring because of below expected milk production increases. December milk production was up only .9 percent from year earlier levels. Moreover, cheese prices were strong and held steady in the $1.40 per pound range during January.
How long will high milk prices last? Most analysts now are projecting declines in milk prices from February to June. In June, the BFP will likely be around $12.00 per cwt., near its historical average. Then, the BFP is projected to rise into the fall and winter months. If this scenario occurs, we are looking at an average milk price for 1998 that is about $1.00 higher than the historical average.