Friday Closing Dairy Market Update - New Contact Highs in Milk Futures

MILK

Milk futures showed strong gains this week with July and later contracts making new contract highs. The gains have been quick and steep, which generally does not last long unless further support comes from positive fundamentals. Buyers perceive that milk supply will tighten and demand will improve as the year progresses. The strength may be premature resulting in a significant price correction once the buying frenzy is finished and the market comes in line with demand. Milk production has been lower than a year ago, but manufacturing plants have been running full schedules. More milk has been moving to plants as schools have closed and will close over the next few weeks. More spot milk is becoming available with prices ranging from $4.00 below to $0.50 above class.

AVERAGE CLASS III PRICES

3 Month:	$20.25
6 Month:	$20.07
9 Month:	$19.69
12 Month:	$19.38

CHEESE

For the week blocks declined 3.75 cents with 34 loads traded. Barrel cheese price jumped 21.25 cents with 10 loads traded. The dry whey price increased by 3 cents with 12 loads traded. The surprise this week was the increase in barrels as fundamentals do not suggest prices to be this high at this time. This changed milk prices and production outlook for the rest of the year. USDA already estimated milk output to increase by one billion pounds. Higher milk prices are generally a result of better milk prices. Inventory is not above a year ago which could result in a tighter supply if demand were to improve.

BUTTER

For the week, butter increased 8 cents moving within 0.50 cent of the previous high. There were 20 loads traded. The Grade A nonfat dry milk price gained 1.25 cents with 30 loads traded. Churns remain active due to the plentiful cream supply. The intent is to churn as much as possible utilizing the available cream. The supply will tighten as the production of ice cream and other Class III products increases.

OUTSIDE MARKETS SUMMARY

July corn closed down 4.50 cents per bushel at $4.5250, July soybeans closed up 11.75 cents at $12.2800 and July soybean meal closed up $1.10 per ton at $368.80. July Chicago wheat closed down 12.00 cents at $6.5125. June live cattle closed up $2.03 at $181.05. June crude oil is up $0.83 per barrel at $80.06. The Dow Jones Industrial Average is up 134 points at 40,004 with the NASDAQ down 12 points at 16,686.

Friday Midday Dairy Market Summary - Butter and Cheese Move Higher

OUTSIDE MARKETS SUMMARY:

CORN:	5 Lower
SOYBEANS:	10 Higher
SOYBEAN MEAL:	$1.00 Higher
LIVE CATTLE:	$1.70 Higher
DOW JONES:	63 Points Higher
NASDAQ:	9 Points Lower
CRUDE OIL:	$0.36 Higher

MIDDAY MARKET UPDATE:

Block cheese price gained 4.25 cents, closing at $1.9425 with five loads traded and three unfilled bids remaining at the close of spot trading. The barrel cheese price increased by 0.50 cent, closing at $2.1250 with five loads traded with only an offer remaining at the close. Barrels remain supported even though the price has moved up quickly. This could bring the block price higher to close the gap. The dry whey price remained unchanged at 41.50 with no loads traded. Class III futures are one cent lower to 35 cents higher with May showing the loss and June showing the greatest gain. The butter price increased 1.50 cents, closing at $5.07 with no loads traded. This is 0.50 cent shy of the high reached on May 3. Nonfat dry milk remained unchanged at $1.1650 with no loads traded. Class IV futures are 10 to 23 cents higher. Butter futures are 1.50 to 6.00 cents higher. Dry whey futures are 0.45 cent lower to 0.72 cent higher.

Friday Morning Dairy Market Update - Milk Futures May See Weakness

OPENING CALLS:

Class III Milk Futures:	5 to 10 Lower
Class IV Milk Futures:	Mixed
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	2 to 3 Higher
Soybean Futures:	8 to 10 Higher
Soybean Meal Futures:	$3 to $4 Higher
Wheat Futures:	7 to 9 Higher

MILK:

There certainly has been no lack of volatility this week. Price swings have been significant as traders are uncertain of the price movement of underlying cash. The block and barrel cheese prices diverging has added to the uncertainty. Milk futures generally do not see this much price strength at this time of year unless fundamentals suggest it. Milk production is lower than a year ago but has not resulted in a tight market. Manufacturers are seeing a greater volume of milk due to schools closing for the summer. More schools will close over the next three weeks with more milk moving to manufacturing. This should keep the market balanced.

CHEESE:

The wide spread between blocks and barrels will not hold with the greater potential being that barrels will decline. Buyers have been aggressively bidding barrels higher and once the current frenzy is satisfied, fundamentals may not support the high price.

BUTTER:

Butter price is expected to increase but not without price retracements. International butter prices are stronger which may improve export demand. Improving export demand would add to the bullish attitude already prevalent in the market.