Dairy Market Outlook

Our dairy market newsletter provides clients with information that examines the current, near-term and future dairy situation. Our letter incorporates the results from our proprietary econometric model on the dairy market- specifically milk, cheese, butter, whey and non-fat dry milk. These are the components of the hedgeable Class III and Class IV prices that can be traded on the exchange. Below are some key statistics about the model:

The dairy herd is relatively constant, and has averaged about 9.2 million cows over the past 10 years. This means that milk production can be predicted to a degree of reliability (Figure 1).
Prices are set by the market and incorporate all of the market's expectations about the past, present and future situation. Thus, these prices are harder to predict. Our model incorporates past information in our effort to predict future prices (Figure 2).
Key inputs, including production and stocks, are utilized to form the basis for each products model. After forecasting each product, the prices are calculated and use the Federal Order pricing equation to arrive at the Class III and Class IV prices.
The model utilizes published USDA and CME data that the market uses.

A sample of the newsletter is available, but at this time, we are no longer accepting subscriptions. However, we can also conduct "what if" tests for your company.

Figure 1. R-squared Values for Production and Prices