Tuesday Closing Dairy Market Update - October Income Over Feed Was $10.52

GENERAL OVERVIEW:

Class III futures closed higher, with Class IV futures mixed. The increase in the block cheese price provided further support. The USDA released the October Agricultural Prices report on Monday with an income over feed price of $10.52.

MILK:

Class III milk prices were higher again, but traders are being cautious. The expectation is that the upside price potential is limited. Support from underlying spot cheese prices may be short-lived once holiday demand is finished. The recent buying is from immediate orders for fresh cheese that need to be filled. Once that is satisfied, prices may fall back again due to the market entering the time of year during which demand is slower. Some had been hoping that there would be some Dairy Margin Coverage payments to help minimize the lower milk price, but that is not the case. USDA released the Agricultural Prices report for October and updated prices since the government shutdown. The October income over feed price was $10.52, leaving no payment for the month. The average corn price was $3.93, down $0.07 from September. The premium/supreme hay price was $223.00 per ton, up $1.00 from the previous month. The soybean meal average price was $300.68 per ton, down $0.37. The All-milk price was $20.00, down $0.40 per cwt from September. USDA did some catching up with the Agricultural Prices report. The result was an income over feed price for September of $10.87 and a price of $11.52 for August. If the current prices hold, there could be a Dairy Margin Coverage payment for December, which would not be known until the end of January. There may not be a payment for November due to the level of milk prices seen in November. November prices will be released at the end of December.

AVERAGE CLASS III PRICES:

3 Month:	$15.82
6 Month:	$16.15
9 Month:	$16.53
12 Month:	$16.79

CHEESE:

The increase in the block cheese price provided support to Class III futures. However, traders are exercising caution due to the price increasing for three consecutive days. Once the current orders are filled and buying interest is complete, the prices are expected to drop back down again. This has been the pattern, and the time of year is likely not going to change that. Once the holiday demand is finished, lower prices are expected again.

BUTTER:

There had been hope that butter had found support and that demand was going to be sufficient to keep buying interest strong at the lower price level. That still may be true, but the indication is that the price will remain low for an extended period.

OUTSIDE MARKETS SUMMARY:

March corn closed down 3.25 cents per bushel at $4.3650, January soybeans closed down 9.00 cents at $10.6275 and January soybean meal closed down $1.10 per ton at $302.40. March Chicago wheat closed down 11.25 cents at $5.0950. February live cattle closed up $0.15 at $230.70. January crude oil is down $1.72 per barrel at $55.10. The Dow Jones Industrial Average is down 302 points at 48,114, with the NASDAQ up 54 points at 23,111.

Tuesday Midday Dairy Market Summary - Block Cheese Shows Further Strength

OUTSIDE MARKETS SUMMARY:

CORN:	3 Lower
SOYBEANS:	11 Lower
SOYBEAN MEAL:	$0.90 Lower
LIVE CATTLE:	$0.05 Lower
DOW JONES:	385 Points Lower
NASDAQ:	100 Points Lower
CRUDE OIL:	$1.29 Lower

MIDDAY MARKET UPDATE:

The block cheese price increased 1.75 cents to close at $1.3975 with six loads traded. This is the third consecutive trading day posting a gain. The barrel cheese price remained unchanged at $1.40 with no loads traded. The dry whey price remained unchanged at 75.00 cents with no loads traded. Class III futures are mixed, ranging from 4 cents lower to 6 cents higher. The butter price declined 1.25 cents, closing at $1.4525 with two loads traded. The gain in the butter price since Dec. 1 has been eliminated. Grade A nonfat dry milk declined 0.75 cent to close at $1.1625 with one load traded. Class IV futures are 2-12 cents lower. Butter futures are 0.30 cent lower to 2.20 cents higher. Dry whey futures are 1.60 cents lower to 1.50 cents higher. Cheese futures are 0.10 to 1.20 cents higher. The Global Dairy Trade action trade-weighted average declined 4.4% today. This is the 10th consecutive trading session showing a decline.

Tuesday Morning Dairy Market Update - Milk Futures May Trade Lower Ahead of Cash

OPENING CALLS:

Class III Milk Futures:	4 to 8 Lower
Class IV Milk Futures:	Mixed
Butter Futures:	1 to 2 Lower

OUTSIDE MARKET OPENING CALLS:

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

MILK:

Milk futures rallied, but the strength may be short-lived. Traders may use the recent strength as a selling opportunity. The overall attitude of traders is bearish and they will use price swings to scalp the market for a profit if they guess correctly. Market fundamentals do not suggest a change in the trend. Milk production remains strong and above a year ago. Slaughter is showing signs of increasing, but the volume of culling is expected to be low. Feed prices are expected to remain reasonable, reducing the cost per cwt of milk. Milk production per cow is significantly higher than a year ago, with components higher. This is improving cheese yields and cream supplies. This is not expected to change anytime soon.

CHEESE:

The buying interest for blocks over the past two days may have nearly run its course. Buyers needed to step up to fill immediate orders that were received and came to the spot market to fill those orders. This is not expected to continue, as it seems unlikely that buying will continue even though prices are low. Buyers have no interest in building inventory.

BUTTER:

A further decrease in the butter price is possible, as there is quite a bit of butter available due to heavy churning activity. Retail demand may be filled, and overall demand may slow after the holiday season. The butter price is expected to remain rangebound through the end of the year.