As printed in our January 10, 2015 issue...

2014 WENT INTO THE MILK-PRICE BOOKS as a record year with the first 11 months each posting watermarks for Class III prices. With an estimated $17.75 December Class III, the year-end average would be $22.37 per hundredweight. That would be more than double the Class III average of just five years ago - 2009's $11.36.

PRICES COULD FALL OVER 20 PERCENT in 2015. USDA economists estimated the 2015 All-Milk price could average $18.85, down from 2014's $24.10. The 2015 projections have fallen steadily from May's opening forecast which had a $20.20 midpoint. Reduced U.S. exports and higher milk flow, both here and abroad, contributed to the downturn.

CLASS III FUTURES AVERAGED $15.90 for January to November CME contracts right before Christmas. The $15.12 contract for April was the low point with October's $16.56 posting the high mark. Spot Cheddar blocks sold for $1.61, as did butter. Barrels traded at $1.55 per pound.

WHILE THE U.S. REMAINED FAIRLY SHELTERED from world prices with 84 percent of its product sold domestically, the same cannot be said for New Zealand. Fonterra, which handles 95 percent of that nation's milk, has lowered milk payout projections 44 percent in the past six months.

A 50-PERCENT-PLUS REDUCTION in whole milk powder prices has been one reason. That drop was from $5,000 per metric ton ($2.26 per pound) in January 2014 to $2,300 ($1.04 per pound). Low prices could be the norm until China, the world's leading importer, draws down internal stocks. Cheese has lost 20 percent in value during the same time.

U.S. MILK FLOW JUMPED BETWEEN 2.5 AND 4.2 PERCENT from July to November after growing less than 2 percent in the first half of the year. Among leading exporting countries, milk flow was pegged to grow 7.4 percent in New Zealand; 4.7 percent, EU; and 3.2 percent, Australia.

CONGRESS PASSED, AND PRESIDENT OBAMA SIGNEDinto law, enhanced 179 deductions for qualifying large equipment and real estate improvements. This included restoring 50 percent bonus depreciation in the 2014 tax year. All purchases must have been used in the tax year.

BRIEFLY: Interest in the Margin Protection Program (MMP-Dairy) continued to grow. By December 11, a week before the final sign-up, roughly 36 percent of the nation's dairy producers had enrolled for 2015 coverage. Dairy replacement exports fell nearly 50 percent as higher domestic prices and a reduced value of Russia's ruble have squelched sales. Iowa farmland fell 8.9 percent in the past year to $7,943 per acre, the largest decline in 28 years. Those values were still double a decade ago. After growing eightfold since 2009, alfalfa shipments to China were down 22 percent between August and October 2014. For the lead case in the Yakima lawsuit (see January 10, 2014, page 7), things were nearing the end, and the Court will hold a hearing on all motions January 6, 2015, reported Bob Naerebout of the Idaho Dairymen's Association.

Click here to see the previous months Washington Dairygrams