Tuesday Morning Dairy Market Update - Spot Prices May Show Little Change

OPENING CALLS:

Class III Milk Futures:	Mixed
Class IV Milk Futures:	Mixed
Butter Futures:	Steady to 1 Higher

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	3 to 5 Lower
Soybean Futures:	2 to 3 Lower
Soybean Meal Futures:	$2 to $3 Higher
Wheat Futures:	5 to 7 Lower

MILK:

Class III milk futures held well despite the turmoil in the other commodity markets. Contracts closed higher, supported by the higher block cheese price. It is unlikely futures will run to the upside significantly, as the market will balance supply and demand. The increase in milk production will require demand to improve, or an oversupply could result as we move through the spring flush. With the outlook for better milk prices, farmers will increase milk production to take advantage of higher prices. USDA will release the World Agricultural Supply and Demand report Tuesday. It will contain estimates for domestic and international grain production and stocks. It will also contain estimates for milk production, milk prices, and dairy product prices for this year. This is not a market mover for dairy, but it will provide the outlook and potential for dairy this year.

CHEESE:

The block cheese price has held well, providing support for a better potential for milk prices. Cheese demand has been good, but it will need to increase to keep up with the expected higher milk output over the next few months. Bottling demand is steady and the increase in milk production will move to manufacturing. USDA is expected to raise the cheese price in the report Tuesday.

BUTTER:

Butter is holding above $2.00. This may be the support level for now as buyers remain active, but not aggressive. Butter supplies are sufficient for demand. The USDA is expected to raise the price outlook in the World Agricultural Supply and Demand report Tuesday.

Monday Closing Dairy Market Update - Class III Futures Close Higher

GENERAL OVERVIEW:

Class III milk futures closed higher, responding to the higher block cheese prices and short covering after two days of price weakness last week. Class IV futures closed mixed despite the spot butter price increasing. The World Agricultural Supply and Demand report will be released on Tuesday.

MILK:

It was no surprise that Class III futures were higher today after two days of lower prices despite the increase in the block cheese price last week. Class III futures had to adjust higher to move somewhat back in line with the cash price. Milk production is improving weekly as cow numbers increase and output per cow rises due to improving cow comfort. Grain prices were rising last week, supported by strong outside markets, primarily by the strength of crude oil. This caused concern over the potential for increasing feed prices, higher fuel prices, and higher fertilizer prices. That took a turn today as crude oil exploded overnight, moving substantially higher than $100 per barrel, only to fall back over $25 per barrel by the end of the day. This turn in the price took the support out of the grain prices. The World Agricultural Supply and Demand Estimates report will be released on Tuesday and will impact grain prices. The report will also contain the USDA's estimates for milk production and dairy product prices for this year.

AVERAGE CLASS III PRICES:

3 Month:	$17.03
6 Month:	$17.63
9 Month:	$17.91
12 Month:	$17.81

CHEESE:

The upside potential for cheese may be limited as milk production increases and the days move closer to the beginning of the spring flush period. Increased milk production will be handled without difficulty, as increased manufacturing capacity is available. Higher milk output will move more milk to the cheese vat as fluid milk demand is expected to remain steady.

BUTTER:

The butter price increased today, but butter futures did not rebound from the losses on Friday. Earlier, higher prices could not hold, with futures falling back into the close of trading. The butter market will need to prove that the price will find solid support and move higher. Domestic butter demand has improved, and international demand remains strong, which should provide support.

OUTSIDE MARKETS SUMMARY:

May corn closed down 6.75 cents per bushel at $4.5375, May soybeans closed down 4.50 cents at $11.9625 and May soybean meal closed down $3.70 per ton at $313.50. May Chicago wheat closed down 13.50 cents at $6.0325. April live cattle closed down $4.43 at $230.15. April crude oil is up $3.87 per barrel at $94.77. The Dow Jones Industrial Average is up 239 points at 47,741, with the NASDAQ up 308 points at 22,696.

Monday Midday Dairy Market Summary - Butter and Block Cheese Prices Increase

OUTSIDE MARKETS SUMMARY:

CORN:	7 Lower
SOYBEANS:	2 Lower
SOYBEAN MEAL:	$3.10 Lower
LIVE CATTLE:	$4.37 Lower
DOW JONES:	488 Points Lower
NASDAQ:	63 Points Lower
CRUDE OIL:	$3.98 Higher

MIDDAY MARKET UPDATE:

The block cheese price increased 1.25 cents, closing at $1.63 with nine loads traded. The price initially increased 2.50 cents before more aggressive selling pressure took the price off its high for the day. The barrel cheese price remained unchanged at $1.57 with no loads traded. The dry whey price remained unchanged at 64.00 cents with no loads traded. Class III futures are steady to 15 cents higher. The butter price increased 0.75 cent to close at $2.0175 with 15 loads traded. The price initially increased to $2.03 before slipping back from the high. Grade A nonfat dry milk remained unchanged at $1.68 with no loads traded. Butter futures are 1.25 cents lower to 2.50 cents higher. Dry whey futures are 0.15-0.90 cent higher. Cheese futures are 0.20 cent lower to 0.30 cent higher. The crude oil price fell back substantially from the overnight highs, which put pressure on grain futures. This created substantial price volatility.