Welcome to the Milk Marketing
"Hedging Opportunity"
Web Site

2007 ended with an average all milk price of $19.10!  What’s the likelihood for that to happen again?  One “expert” opinion based on the market fundamentals is predicting an average all milk price of $16.95 for 2008.  Current prices are still very strong.  Now is the time to discuss a “risk management” strategy with your advisors. 

To be a good marketer one must respect history as well as supply and demand.  The green, blue and purple lines depict historical class III prices since 1988*.  Green is the historical class III average; blue the top historic average and purple the top one-third historical average.  As a guideline, consider establishing a floor with a put option when the current price (red line) breaks the historic average (green line).  When current prices break the blue line think about a hedge.  A break over the purple line is a stronger signal to consider hedging or perhaps forward contracting.  The historical class III average is simple a mathematical average of all price since 1988.  The top historical average is an average of all the highest prices recorded for a given contract month.  The top one-sixth historic average is a true statistical measure.  It is an average the highest prices one standard deviation above the mean.  Remember, one standard deviation on either side of the mean captures two-thirds of all prices.  The remaining third is divided in to the top one-sixth and the bottom one-sixth. 

Watch the 12 and 6 month futures average milk price posted on the chart.  How do these prices compare to your milk plant or cooperatives 12 and 6 month contract prices?

*  Class III did not exist until recently.  Class III replaced the M-W (Minnesota-Wisconsin) price.  Both pricing systems, however, reflect cheese prices even thought they are calculated much differently. In a Wisconsin study, the average difference in the old M-W price  and Class III price was only 3 cents. 

These charts are updated on a daily basis, (Monday-Friday) after 3:30 PM CST.

Prices can change on a daily basis and producers should regularly check the markets to keep informed of any potential opportunities. Chart and data prepared by Jim Faust, UWEX Ag Agent, (715) 232-1636.

E-Mail any suggestions or inquiries to: Jim Faust

Calculating Your Milk Production Cost per CWT (simplified)  Word Document

By: Jim Faust, UWEX Ag Agent, (715) 232-1636.

USDA's National Ag Risk Education Library

Daily Movement of Class III Milk Futures Prices
An Excel spreadsheet detailing the daily percentage change of CME closing prices.  You will need MS Excel 97 or greater to view this spreadsheet.  Updated every weekday.

Web Links to Milk Market Price Information:
............................Milk Futures Settled Prices: CME
............................Milk Options Settled Prices: CME
............................Cheese Daily Cash Prices: CME

“BFP/MW/Class III Price Summary” 
By: Jim Faust, UWEX Ag Agent, (715) 232-1636

"Boston Class I Announced Milk Price"

Check out this site for the Boston Class I Milk Price.  Must have Adobe Acrobat Reader to view.

"Understanding Dairy Markets" University of Wisconsin June-1999

"WMMB Wislink" One stop URL for Dairy Information