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Agrimarketing : January February 2008
January/February 2008 AgriMarketing 23 Prices will be lower in the first three quarters and higher in the fourth than last year. Those prices are $44, $48, $49, and $45 respectively. The key issue for 2008 will be the jump in feed costs. Breakevens at $54 should be enough to start a light liq- uidation cycle and prop 2009 pricing. DAIRY OUTLOOK by Greg Scheer, Doane Advisory Services, St. Louis, MO firstname.lastname@example.org The dairy industry enjoyed very strong prices in 2007. The farm level all-milk price for the year averaged around $19 per cwt., nearly 20% above the previous record high. Prices spiked to $21.70 per cwt. last summer and held near that level through the end of the year. So, how is 2008 shaping up? Milk production growth is expected to continue in 2008. For the first half of 2007, milk output was up only 1% year-over-year, but jumped to over 3% growth the second half of the year. Milk producers have responded to the strong prices by expanding herds. Output per cow has also improved despite growing pres- sure against the use of the hor- mone rBST. Pro- duction growth in 2008 is expected to moderate as cow numbers peak early in the year. Producers will be dealing with tighter profit margins given the high price of feed and increased costs of other inputs. Strong international demand for milk products was a key factor for the spike in prices in 2007. Tight sup- plies of milk products on the global market and in the U.S. helped push non-fat dry milk prices to new highs this summer. Increased production and stocks since then have helped prices moderate. In 2008, exportable milk product prices are expected to slip below the levels of 2007, but con- tinued tight supplies on the world market and strong demand should limit losses in non-fat dry prices. Domestically, strong demand for cheese has helped farm-level milk prices hold at high levels this fall and winter. Total cheese stocks are running below year-earlier levels. High retail milk prices have trimmed fluid consumption in recent months. That coupled with increased produc- tion should push more milk into manufacturing in 2008, which will help build stocks again. In summary, increasing milk pro- duction and declining fluid consump- tion will help build stocks of milk products. Higher inventories will ease prices from the record levels posted in 2007. However, strong demand for dairy products domestically is expected to continue into 2008. Export demand for milk products are also expected to remain strong as world supplies remain tight. The annual average farm-level milk price is expected to fall 5 to 6% next year, but should still be the sec- ond highest level on record. AM Scheer
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