Tuesday Closing Dairy Market Update - Milk Futures Decline as Further Premium Is Eliminated

GENERAL OVERVIEW:

Milk futures closed under pressure today following the weakness of spot prices. This further indicates that price potential will be limited for the foreseeable future. Milk production is expected to remain strong throughout the rest of the year.

MILK:

There is nothing fundamentally new in the market. Strong milk production and increasing cow numbers continue to dominate the market. Any increase in demand is being met with sufficient milk supplies. Low prices should cure low prices, but this is not evident in the market. A substantial amount of income for the farm operation continues to come from high calf prices. The threshold for culling cows has been lowered, resulting in more cows remaining in the dairy herd. The April Milk Production report will be released on Friday, and it is expected to follow a similar pattern as it has been. Higher milk output and cow numbers from the previous year. It is uncertain what will change that pattern anytime soon. There is an element in the market that may also limit demand as the year progresses, and that is high prices for food and fuel. This has curtailed restaurant traffic to some extent and could remain that way or curtail further if high prices persist.

AVERAGE CLASS III PRICES:

3 Month:	$16.96
6 Month:	$17.68
9 Month:	$17.88
12 Month:	$17.85

CHEESE:

The decline in cheese prices increased the bearishness in the market. The block cheese price moved below the sideways trading range, with the price at the lowest level since March 13th. The barrel price moved to the lowest level since March 12th. More milk will be moving to the cheese vat as schools close for the summer. This will increase cheese production, providing a sufficient supply to the market, keeping cheese buyers complacent about supply.

BUTTER:

The butter price remains in a downtrend but has remained above the previous low. The action today potentially increases the chance of the price revisiting the low. Manufacturers keep offering butter to the spot market aggressively and are willing to sell at lower prices to move it.

OUTSIDE MARKETS SUMMARY:

July corn closed down 1.75 cents per bushel at $4.7525, July soybeans closed down 3.50 cents at $12.0950, and July soybean meal closed down $2.20 per ton at $332.30. July Chicago wheat closed up 2.75 cents at $6.6725. August live cattle closed up $0.10 at $247.25. July crude oil is down $0.23 per barrel at $104.15. The Dow Jones Industrial Average is down 322 points at 49,364, with the NASDAQ down 220 points at 25,871.

Tuesday Midday Dairy Market Summary - Spot Prices Show Weakness

OUTSIDE MARKETS SUMMARY:

CORN:	3 Lower
SOYBEANS:	4 Lower
SOYBEAN MEAL:	$2.10 Lower
LIVE CATTLE:	$1.35 Higher
DOW JONES:	98 Points Lower
NASDAQ:	59 Points Lower
CRUDE OIL:	$0.87 Lower

MIDDAY MARKET UPDATE:

The block cheese price declined 2.25 cents to close at $1.5325 with 15 loads traded. The barrel cheese price declined 4.00 cents, closing at $1.5150 with no loads traded. The dry whey price remained unchanged at 69.00 cents with no loads traded. Class III futures are 1-28 cents lower. The butter price declined 4.00 cents to close at $1.60 with 12 loads traded. Grade A nonfat dry milk price declined 1.50 cents to close at $2.2550 with one load traded. Class IV futures are 6-63 cents lower. Butter futures are 0.25 - 2.95 cents lower. Dry whey futures are 0.50 cent lower to 0.20 cent higher. Cheese prices are 0.40 - 2.10 cents lower. This does not bode well for the long-term outlook for milk prices.

Tuesday Morning Dairy Market Update - Milk Futures Show Weakness

OPENING CALLS:

Class III Milk Futures:	2 to 5 Lower
Class IV Milk Futures:	4 t o 8 Lower
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	2 to 3 Higher
Soybean Futures:	3 to 5 Higher
Soybean Meal Futures:	$1 to $2 Higher
Wheat Futures:	5 to 7 Higher

MILK:

Overnight trade indicates lower trade Tuesday, ahead of spot trading. Each time it seems support may be developing under the market, it fails to follow through. It has happened numerous times, leaving the market with limited strength even if underlying cash prices are supported. Howver, higher cash prices continue to be short-lived. Manufacturers want to move supplies as quickly as possible rather than build inventory. This may result in a bullish market later in the year if demand increases seasonally. However, continued strong milk production may keep sufficient milk available for bottling and manufacturing, limiting or eliminating any market tightness.

CHEESE:

Steady cheese prices on Monday were viewed as bearish to the market. The inability of cash prices to increase gives the impression supplies are sufficient due to steady cheese production. More milk will be finding its way to the vat as schools close for the summer. This will offset any increase in demand.

BUTTER:

Butter may be experiencing some price support, but that does not mean it will trend higher. It means it may not fall back to the lows. Demand has been improving. There has been a substantial volume of loads traded on he spot market for quite a few weeks, but it is moving to demand and not building inventory to any great extent. This should be positive in the long term.