Monday Closing Dairy Market Update - Dairy Cattle Slaughter Declines

GENERAL OVERVIEW:

Milk futures were mixed, with contracts mostly lower in Class III and mixed in Class IV. Class IV futures did not react much to the weakness of butter and nonfat dry milk. Dairy cattle slaughter in January was lower than in December and lower than the previous year. USDA will release the January Cold Storage report on Tuesday.

MILK:

Milk futures held their ground for the most part today, regardless of what spot prices did. The weakness of dry whey offset the gain in the block cheese price. However, the weakness of butter and nonfat dry milk should have put more pressure on Class IV futures, but traders took it in stride, believing that it may be a temporary setback. On the other hand, milk production continues to outpace last year, and the increasing cow numbers will support that growth. With the potential for higher milk prices as the year progresses due to the recent increase in the spot prices, farmers will continue to increase cow numbers. January dairy cattle slaughter totaled 246,800 head. This was 1,000 head less than January 2025 and 1,600 less than December. This was the lowest January slaughter since 2008. USDA will release the January Cold Storage report on Tuesday, providing insight into the level of demand for the month.

AVERAGE CLASS III PRICES:

3 Month:	$16.27
6 Month:	$17.04
9 Month:	$17.38
12 Month:	$17.42

CHEESE:

The block cheese price remained resilient today, bouncing back from an initial loss to close higher. Buyers did not step back to see if they could purchase supplies at lower prices, but remained aggressive in their desire to purchase in case higher prices would unfold sometime during the year. Currently, it looks like the milk supply will be sufficient to maintain strong cheese production.

BUTTER:

Butter may have established a temporary top as buyers may have purchased their desired supplies. This may leave a void in the market with little desire for buyers to be aggressive, as the sellers seem very willing to purchase butter but only at lower prices. It will be interesting to see whether butter inventory increased or decreased during the month compared to the previous year.

OUTSIDE MARKETS SUMMARY:

March corn closed steady at $4.2750, May soybeans closed down 3.50 cents at $11.4975 and May soybean meal closed down $1.30 per ton at $312.50. May Chicago wheat closed down 6.50 cents at $5.7375. April live cattle closed down $2.75 at $239.25. April crude oil is down $0.20 per barrel at $66.28. The Dow Jones Industrial Average is down 822 points at 48,804, with the NASDAQ down 259 points at 22,627.

Monday Midday Dairy Market Summary - Sellers Turn More Aggressive in Butter

OUTSIDE MARKETS SUMMARY:

CORN:	1 Higher
SOYBEANS:	2 Higher
SOYBEAN MEAL:	$0.60 Higher
LIVE CATTLE:	$2.32 Lower
DOW JONES:	702 Points Lower
NASDAQ:	245 Points Lower
CRUDE OIL:	$0.13 Lower

MIDDAY MARKET UPDATE:

The block cheese price increased 1.75 cents, closing at $1.5150 with six loads traded. The price initially declined 0.25 cent before buying interest took the price higher. The barrel cheese price remained unchanged at $1.49 with no loads traded. The dry whey price decreased 2.50 cents to close at 65.50 cents with no loads traded. Class III futures are mixed, ranging from 6 cents lower to 11 cents higher. Contracts through June are lower, while later contracts are higher in light trading activity. The butter price decreased 5.75 cents, closing at $1.8125 with 18 loads traded. The Grade A nonfat dry milk price decreased 4.00 cents to close at $1.6450 with two loads traded. Class IV futures are steady to 26 cents higher. Butter futures are 0.95 cent lower to 4.00 cents higher and are not reacting to the lower butter and nonfat prices. Dry whey futures are 0.55-2.00 cents lower. Cheese futures are 0.60 cents lower to 1.30 cents higher.

Monday Morning Dairy Market Update - Mixed Futures Price Activity Ahead of Spot Trading

OPENING CALLS:

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

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	1 to 2 Lower
Soybean Futures:	6 to 9 Lower
Soybean Meal Futures:	$4 to $5 Lower
Wheat Futures:	3 to 4 Lower

MILK:

The milk production report was released Friday and showed continued strong milk production, production per cow, and higher cow numbers. The addition of 14,000 cows in the country indicates the retention of cows continues. With the recent increase in milk futures pointing to the potential for higher milk prices, the desire to hold onto cows will continue. Not only the potential for higher milk production, but also the continued high prices for calves. The USDA will release the January Monthly Cold Storage report on Tuesday, providing a good picture of demand for the month.

CHEESE:

Traders will be cautious due to the weakness of the block cheese price on Friday. This may indicate buyers have reached a threshold. If they are unwilling to bid higher to purchase cheese, sellers may become more aggressive as they want to sell at the highest price possible. This could push the price lower again.

BUTTER:

It is uncertain how much potential the market has after the substantial gains of last week. The government has indicated it will purchase $75 million of butter for food banks. This seems to have spurred the recent buying in the spot butter market. This purchase may now be factored in with limited upside potential from here.