Friday Closing Dairy Market Update - May Fluid Milk Sales Decreased 2.1%

GENERAL OVERVIEW:

Milk futures closed mixed. The increase in cheese prices resulted in the nearby months closing with double-digit gains except for July. The rest of Class III and IV futures were mixed. Trade volume was large in the August and September contracts. Fluid milk sales in May were 2.1% below a year ago.

MILK:

Class III milk futures posted a strong week in the nearby contract with September, October, and November contracts closing above $18.00, where they had not been since May 21st. Strength in cheese prices supported the gains. Futures may have limited upside from here unless buyers continue to purchase cheese aggressively next week. Class IV futures struggled, unable to find support from butter and nonfat dry milk. Milk sales in May were 2.1% below a year ago. Whole milk sales increased 0.1%; flavored whole milk increased 11.0%; reduced fat milk decreased 5.4%; low fat milk decreased 9.7%; fat-free skim milk decreased 11.3%; flavored fat-reduced milk decreased 8.2%; buttermilk declined 2.0%, and other fluid milk product sales increased 24.1%. Organic whole milk sales increased 2.0%; organic flavored whole milk increased 1.9%; organic reduced fat milk decreased 2.0%; organic low-fat milk decreased 8.0%; organic fat-free milk decreased 13.4%; organic flavored fat-reduced milk decreased 16.1%; and other organic fluid milk product sales decreased 100.0%.

AVERAGE CLASS III PRICES:

3 Month:	$17.20
6 Month:	$17.59
9 Month:	$17.55
12 Month:	$17.54

CHEESE:

For the week, block increased 8.00 cents with 27 loads traded. The weekly average price is $1.6055 compared to $1.5150 last week. Barrels increased 5.25 cents with 7 loads traded. The weekly average price is $1.5950 compared to $1.5270 last week. Dry whey increased 0.50 cent with 3 loads traded. The weekly average price is 69.40 cents compared to 67.90 cents last week. The block price moved to the highest level since May 13th. Barrels moved to the highest level since May 6th.

BUTTER:

For the week, butter decreased 6.00 cents with 57 loads traded. The weekly average price is $1.6085 compared to $1.6500 last week. Grade A nonfat dry milk decreased 8.50 cents with 37 loads traded. The weekly average price is $1.5045 compared to $1.5160 last week.

OUTSIDE MARKETS SUMMARY:

December corn closed up 3.50 cents per bushel at $4.6750, November soybeans closed up 8.00 cents at $12.0300, and December soybean meal closed down $3.90 per ton at $318.50. September Chicago wheat closed up 8.00 cents at $6.8275. August live cattle closed down $2.65 at $224.43. August crude oil is up $3.54 per barrel at $82.49. The Dow Jones Industrial Average is down 407 points at 52,146, with the NASDAQ down 362 points at 25,520.

Friday Midday Dairy Market Summary - Cheese and Butter Find Continued Support

OUTSIDE MARKETS SUMMARY:

CORN:	3 Higher
SOYBEANS:	10 Higher
SOYBEAN MEAL:	$2.70 Lower
LIVE CATTLE:	$2.55Lower
DOW JONES:	189 Points Lower
NASDAQ:	184 Points Lower
CRUDE OIL:	$2.42 Higher

MIDDAY MARKET UPDATE:

The block cheese price increased 2.75 cents to close at $1.6275 with one load traded. The barrel cheese price increased 1.00 cent with no loads traded. The dry whey price remained unchanged at 69.50 cents with no loads traded. Buyers are supporting the market as they are increasing purchases to take advantage of the low prices. However, with sufficient cheese available, they do not need to be very aggressive. Class III futures are 4 cents lower to 18 cents higher. The butter price increased 0.25 cent to close at $1.5900 with 11 loads traded. Grade A nonfat dry milk slipped 0.25 cent to close at $1.4700 with no loads traded. Class IV futures are mixed in light trade with futures ranging from 11 cents lower to 6 cents higher. Butter futures are 1.00 cent lower to 2.25 cents higher. Dry whey futures are 0.02 -- 0.25 cent higher. Cheese futures are 0.20 cent lower to 2.10 cents higher. Nonfat dry milk futures are 0.12 -- 1.42 cents lower.

Friday Morning Dairy Market Update - Class III Futures Move Above Class IV

OPENING CALLS:

Class III Milk Futures:	8 to 12 Higher
Class IV Milk Futures:	Mixed
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	Mixed
Soybean Futures:	Mixed
Soybean Meal Futures:	$1 to $2 Lower
Wheat Futures:	3 to 4 Higher

MILK:

Class III milk futures have been in a strong uptrend since July 6 in response to increasing cheese prices. Futures have moved back to the highest levels since late May. Class III futures are now above Class IV futures. This has been a rarity over the past four years. There has not been a significant shift in market fundamentals. Buyers have turned their attention to upcoming seasonal demand and have been willing to purchase cheese more aggressively to increase their ownership of supplies. The decrease in milk production has reduced the overall supply of milk, but has not caused a shortage. Some spot milk remains available at a discount to class. The June Milk Production report will be released next week and is expected to show continued strong milk output as well as increased cow numbers.

CHEESE:

Cheese buyers have been active in the spot market, but not aggressive. Prices have been increasing, but not by leaps and bounds. Buyers do not seem to be concerned about the availability of supply, but seem more interested in purchasing steadily to avoid the risk of higher prices down the road.

BUTTER:

Butter has not been able to find solid footing. The price of butter below the cheese price is unusual and has been seen very few times over the past years. Reduced butter production may eventually tighten the market and support the price as demand improves through the end of the year.