Tuesday Closing Dairy Market Update - Nonfat Dry Milk Pressures Class IV Contracts

GENERAL OVERVIEW:

It was a rough day for Class IV futures, with contracts declining substantially. The large decline in nonfat milk triggered liquidation in a thinly traded market. The decline in nonfat dry milk was the second-largest decline since the market peak.

MILK:

Sometimes, there have been glimmers of hope that maybe the market has found support in seasonality and demand. Those hopes have been temporary, with the aftermath being more bearish than previously. Two weeks ago, Class IV futures rebounded, looking as if support may have been found. That was eliminated over the past week, with prices plummeting today. The decline in spot Grade A nonfat dry milk was the second-largest one-day decline since the market peaked on May 7. The price has declined 39.75 cents since the record high that day. We are again seeing that the market always falls faster than it increases. The price increased until there was demand destruction, resulting in buyers stepping back. The same holds in all markets as high prices cure high prices. The unusual is taking place in the milk market, as low milk prices are not reducing milk production as is usually the case. Milk production is increasing as cow numbers grow. Revenue other than for milk is fueling the increase in milk output and further expansions.

AVERAGE CLASS III PRICES:

3 Month:	$16.66
6 Month:	$17.38
9 Month:	$17.49
12 Month:	$17.49

CHEESE:

Demand is improving and so is supply. It is keeping pace with one another, keeping spot cheese prices in a range. Spot cheese prices remained unchanged, but there were 12 uncovered offers remaining for blocks at the close of trading. Manufacturers want to limit the build-up of inventory and will continue to offer cheese to the market.

BUTTER:

The uptrend in the butter price has stalled and has been moving sideways. This could lead to buyers stepping back as they see sufficient butter supplies. Consistent butter production due to churns operating seven days a week will keep butter readily available to the market.

OUTSIDE MARKETS SUMMARY:

July corn closed up .75 cent per bushel at $4.1950, July soybeans closed down 2.00 cents at $11.1375, and July soybean meal closed down $1.60 per ton at $301.10. July Chicago wheat closed up 2.00 cents at $5.8525. August live cattle closed up $2.98 at $239.70. July crude oil is down $3.10 per barrel at $88.20. The Dow Jones Industrial Average is up 86 points at 50,872, with the NASDAQ down 251 points at 25,679.

Tuesday Midday Dairy Market Summary - Nonfat Dry Milk Plummets

OUTSIDE MARKETS SUMMARY:

CORN:	Unchanged
SOYBEANS:	3 Lower
SOYBEAN MEAL:	$1.10 Lower
LIVE CATTLE:	$1.72 Higher
DOW JONES:	103 Points Lower
NASDAQ:	461 Points Lower
CRUDE OIL:	$3.10 Lower

MIDDAY MARKET UPDATE:

Both block and barrel cheese prices remained unchanged at $1.4850 and $1.4800 respectively. There were no loads traded. Blocks had 3 unfilled bids and 12 uncovered offers remaining at the close. The dry whey price increased 0.75 cent, closing at 67.75 cents with no loads traded. However, Class III futures are under pressure with prices ranging from 7 to 12 cents lower. The butter price declined 2.50 cents to close at $1.6750 with 19 loads traded. There was one unfilled bid and 34 uncovered offers remaining at the close of spot trading. Grade A nonfat dry milk fell 10.25 cents to close at $1.8975 with 7 loads traded. This is the lowest price since March 23rd. Class IV futures have only traded in 2 contract months. July is 87 cents lower, with August 51 cents lower. Butter futures are 0.22 to 6.25 cents lower. Dry whey futures are steady to 1.00 cent lower. Cheese futures are 0.30 -- 1.00 cents lower.

Tuesday Morning Dairy Market Update - Limited Activity Expected Ahead of Spot Trading

OPENING CALLS:

Class III Milk Futures:	4 to 8 Higher
Class IV Milk Futures:	4 to 6 Higher
Butter Futures:	Steady to 1 Higher

OUTSIDE MARKET OPENING CALLS:

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

MILK:

The market is expected to remain choppy. The fundamentals continue to follow the path they have been on for some time. Traders find little to get excited over and continue to try to scalp the market for a short-term profit if they guess correctly. However, with limited volatility, trading volume has been lighter as some traders see limited opportunity. If market fundamentals remain as they are, there will be limited upside potential with futures rolling down as the premium erodes. The June contract is nearly priced and will not move much through the rest of the month. July contracts will move closer to the June over the next few weeks if fundamentals do not change.

CHEESE:

Cheese supplies are sufficient for demand. Schools being closed has moved more milk to the vat. Cheese demand has kept pace with increased production, keeping inventory slightly below a year ago. Historically, inventory should decline during the second half of the year, but strong milk output may limit the decline in inventory.

BUTTER:

The butter price seems to be supported but may have limited upside potential as long as sellers remain aggressive. There were a significant number of uncovered offers at the close of spot trading on Monday. That does not necessarily mean those sellers will be aggressive Tuesday, but it may indicate the upside potential may be limited.