Last week, Michael Marsh, chief executive officer of Western United Dairymen, speaking at the 21st annual Agribusiness Management Conference in Fresno, said he expects price relief in the third quarter of 2003, but that may be too late for some California dairymen unable to withstand depressed returns.

University of Wisconsin’s Bob Cropp agrees. Cropp, a dairy economist, delivered a similar message to northeast Iowa producers last week. He predicts that the Class III price will average about $11.69 next year. That’s up from the Class III price average expected for this year of $10.43.

The market has both went higher and lower than expected this year. Part of the reason behind such volatility, says Cropp, is that milk is a perishable product and cows must be milked every day. Dairy products can’t be stored forever like grains.

In addition, both cow numbers and milk per cow were up this year. Add to that a weak economy and low consumer confidence and people just aren’t eating out as much as they were before the September 11 terrorist attacks. Flat consumer demand — actually 2002 is stacking up to be a decline of 0.2 percent — combined with a milk surplus will not help milk prices out of the basement. Any movement in prices will be slow and over time. Of course, any significant weather patterns that could hamper milk production, such as El Nino, could change the outlook, they said. However, a decrease in production alone won’t fix low milk prices. The national economy needs to strengthen so that consumers will feel more comfortable eating out and spending money again.

The other factor that comes into play for how quickly prices will recover is the Milk Income Loss Contract program, says Marsh. Those supplemental payments to producers will "soften the upward bounce we might have had after this year's low prices because the supply response will be muted."  Problem is those payments are geared toward smaller producers and do not really offer larger producers much help to weather these low milk prices.

Cropp projects the MILC payments for 2003 will work out to about $1 to $1.10 per hundredweight of milk. So, for a farm that receives MILC payments on all of the milk it produces, that makes for a 2003 Class III average price of  $12.69 to $12.79.

Cropp offered these Class III milk price projections for the rest of 2002 and 2003:

  • November 2002 - $9.80
  • December 2002 - $9.95
  • January 2003 - $10
  • February 2003 - $10.60
  • March - $10.80
  • April - $11
  • May - $11.30
  • June - $11.60
  • July - $12.45
  • August - $12.70
  • September - $12.90
  • October - $12.80
  • November - $12.10
  • December - $12

Agri View, California Farm Bureau