Tuesday Morning Dairy Market Update - Milk Futures Are Unable to Find Support

OPENING CALLS:

Class III Milk Futures:	5 to 10 Lower
Class IV Milk Futures:	2 to 5 Lower
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	2 to 3 Lower
Soybean Futures:	4 to 5 Lower
Soybean Meal Futures:	$2 to $3 Lower
Wheat Futures:	5 to 6 Lower

MILK:

The negativity in Class IV futures on Monday was a surprise. The strength in the Grade A nonfat dry milk price seemed not to influence the trade. Either the market corrected to come more closely in line with cash, or traders anticipate the price will meet resistance and buyers will step back. The nonfat dry milk market may be developing a void under it, and a price decline may be faster than the increase. There certainly is sufficient milk available for all areas of dairy product production. Traders are not anxious to support Class III milk futures with overnight contracts moving deeper into the red.

CHEESE:

The weakness of spot cheese prices does not provide any indication of the market finding support. The block cheese price has been in a steady downtrend over the past month. Cheese production is slowly increasing while demand remains steady.

BUTTER:

The butter price has remained steady over the past two trading sessions, but that does not indicate the market has found support. Butter supplies remain plentiful, leaving buyers unaggressive as they continue to purchase at lower prices. Butter inventory is expected to move in line with last year over the next few months. The decline in inventory may be less than usual during the second half of the year.

Monday Closing Dairy Market Update - Milk Futures Were Unable to Find Support

GENERAL OVERVIEW:

The weakness in Class III futures was expected because of the decline in cheese prices. The weakness in Class IV futures was contrary to the movement of the underlying cash.

MILK:

Class III futures are lower, with the October contract closing below $16.00 for the first time. Class IV futures were under significant pressure despite the strength in Grade A nonfat dry milk. Either traders felt the upside potential for nonfat dry milk is limited, with the potential for both price and demand to decline, or traders decided to take profits from long positions to preserve the gains. It is another one of those days when futures move in the opposite direction from what you would anticipate. The spread between Class III and Class IV prices continues to widen. The price premium continues to erode out of Class III futures as cheese prices decline. The fact that butter and cheese prices are unable to trend higher at this time of year does not bode well for the market for the rest of the year.

AVERAGE CLASS III PRICES:

3 Month:	$16.10
6 Month:	$16.41
9 Month:	$16.69
12 Month:	$16.91

CHEESE:

The block cheese price fell to the lowest level since June 26. Barrels fell to the lowest level since June 17. There is no indication as to where support might be found. If there is a bounce in price, it will only be short-lived under the current market fundamentals. Milk production should remain plentiful for cheese output. Inventory may remain steady or possibly increase moving through the rest of the year.

BUTTER:

The butter price held steady on Friday and today, but that does not indicate the price has found support. Sellers may not want to sell butter lower than the current level. However, buyers see no reason to be aggressive.

OUTSIDE MARKETS SUMMARY:

December corn closed up 3.00 cents per bushel at $5.3325, November soybeans closed up 7.75 cents at $13.0425, and December soybean meal closed up $3.40 per ton at $356.20. December Chicago wheat closed down 3.25 cents at $7.2200. October live cattle closed up $2.58 at $222.25. October crude oil is up $1.67 per barrel at $101.72. The Dow Jones Industrial Average is down 155 points at 52,418, with the NASDAQ down 144 points at 26,189.

Monday Midday Dairy Market Summary - October Class III Futures Fall Below $16.00

OUTSIDE MARKETS SUMMARY:

CORN:	2 Higher
SOYBEANS:	6 Higher
SOYBEAN MEAL:	$3.00 Higher
LIVE CATTLE:	$2.57 Higher
DOW JONES:	101 Points Lower
NASDAQ:	20 Points Lower
CRUDE OIL:	$1.33 Higher

MIDDAY MARKET UPDATE:

Block cheese price declined 4.00 cents to close at $1.4200 with four loads traded. The barrel cheese price declined 2.25 cents to close at $1.4400 with no loads traded. The dry whey price remained unchanged at 76.00 cents with no loads traded. Class III milk futures are 18 cents lower to 1 cent higher. The October contract is trading below $16.00. The butter price remained unchanged at $1.3700 with no loads traded. There was an unfilled bid and 20 uncovered offers remaining at the close of spot trading. Grade A nonfat dry milk gained 2.50 cents to close at $1.9950 with three loads traded. Class IV futures have not yet traded. Futures will be higher when trading activity takes place. Butter futures are 1.00 cent lower to 0.77 cent higher. Dry whey futures are 0.25-0.42 cent lower. Cheese futures are steady to 1.60 cents lower. Nonfat dry milk futures are 0.60-2.40 cents lower despite the price increase.