Tuesday Closing Dairy Market Update - Dairy Futures Slip

GENERAL OVERVIEW:

Class III futures closed under pressure despite the increase in block cheese and dry whey prices. Class IV futures were mixed despite the increase in the Grade A nonfat dry milk price. The Global Dairy Trade auction trade-weighted average decreased 1.1%.

MILK:

Milk futures did not respond to higher cash prices. It is likely the increase in the block cheese price will be short-lived, keeping the market bearish. There is nothing that can be seen as friendly to the market. It is unlikely that culling will increase anytime soon to make enough of a difference to tighten the milk supply. The first reaction is to push more milk production to make up for lower milk and calf prices. Expansions continue as increased processing capacity has allowed some farms to expand. The Global Dairy Trade auction trade-weighted average declined 1.1%. This is the first decline after four consecutive gains. There were 42,444 metric tons sold at an average price of $3,868 per metric ton. The anhydrous milk fat price decreased 3.0%to $5,739 per metric ton or $2.60 per pound. Butter decreased 5.7% to $4,760 per metric ton or $2.16 per pound. Buttermilk powder decreased 0.5% to $4,549 per metric ton or $2.06 per pound. Cheddar cheese jumped 16.5% to $4,075 per metric ton or $1.85 per pound. Lactose decreased 4.3% to $1,794 per metric ton or $0.81 per pound. Skim milk powder increased 0.1% to $3,689 per metric ton or $1.67 per pound. Whole milk powder decreased 0.8% to $3,565 per metric ton or $1.62 per pound. Mozzarella cheese decreased 6.0% to $3,992 per metric ton or $1.81 per pound.

AVERAGE CLASS III PRICES:

3 Month:	$16.11
6 Month:	$16.39
9 Month:	$16.65
12 Month:	$16.86

CHEESE:

The bounce in the block cheese price is expected to be short-lived. There is little reason for buyers to remain aggressive. It is likely that immediate orders need to be filled, causing buyers to be more aggressive. Once those orders are filled, there may be little else to support the market. I hate to sound bearish, but fundamentally, there is little to provide sustained support to the market.

BUTTER:

The butter price is only 5.50 cents above the low for the year that was set on January 13th. One would think the low price would stimulate demand, but it has not been sufficient to tighten the supply. There is no clear indication as to where the bottom might be.

OUTSIDE MARKETS SUMMARY:

December corn closed up 2.50 cents per bushel at $5.3575, November soybeans closed up 14.50 cents at $13.1875, and December soybean meal closed up $9.20 per ton at $365.40. December Chicago wheat closed up 6.50 cents at $7.2850. October live cattle closed down $1.55 at $220.70. October crude oil is up $4.49 per barrel at $105.88. The Dow Jones Industrial Average is down 328 points at 52,093, with the NASDAQ down 205 points at 25,982. 

Tuesday Midday Dairy Market Summary - Nonfat Dry Milk Marches Higher

OUTSIDE MARKETS SUMMARY:

CORN:	1 Higher
SOYBEANS:	12 Higher
SOYBEAN MEAL:	$8.60 Higher
LIVE CATTLE:	$1.97 Lower
DOW JONES:	421 Points Lower
NASDAQ:	218 Points Lower
CRUDE OIL:	$4.96 Higher

MIDDAY MARKET UPDATE:

The block cheese price increased 1.50 cents to close at $1.4350, with 9 loads traded. The barrel cheese price remained unchanged at $1.4400, with no loads traded. The dry whey price increased 0.25 cent to close at 76.25 cents with 2 loads traded. The strength in blocks and dry whey has had little impact on Class III futures. Contracts are 23 cents lower to 3 cents higher. The substantial weakness is seen in the October and November 2027 contracts. Higher prices are only seen in the October and November 2026 contracts. The butter price declined 1.50 cents to close at $1.3550 with 18 loads traded. There were 10 unfilled bids and 54 uncovered offers remaining at the close of spot trading. Grade A nonfat dry milk gained 4.00 cents to close at $2.035 with 3 loads traded. Both price strength and weakness have been incredible since the beginning of the year. Class IV futures have only shown trades in the April, July, and August contracts at 37 cents, 24 cents, and 34 cents lower. Butter futures are 1.90 cents higher to 1.62 cents lower. Dry whey futures have not traded. Cheese futures are 1.10 cents lower to 0.80 cent higher. Nonfat dry milk futures are 0.90 cent lower to 1.22 cents higher.

Tuesday Morning Dairy Market Update - Milk Futures Are Unable to Find Support

OPENING CALLS:

Class III Milk Futures:	5 to 10 Lower
Class IV Milk Futures:	2 to 5 Lower
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

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

MILK:

The negativity in Class IV futures on Monday was a surprise. The strength in the Grade A nonfat dry milk price seemed not to influence the trade. Either the market corrected to come more closely in line with cash, or traders anticipate the price will meet resistance and buyers will step back. The nonfat dry milk market may be developing a void under it, and a price decline may be faster than the increase. There certainly is sufficient milk available for all areas of dairy product production. Traders are not anxious to support Class III milk futures with overnight contracts moving deeper into the red.

CHEESE:

The weakness of spot cheese prices does not provide any indication of the market finding support. The block cheese price has been in a steady downtrend over the past month. Cheese production is slowly increasing while demand remains steady.

BUTTER:

The butter price has remained steady over the past two trading sessions, but that does not indicate the market has found support. Butter supplies remain plentiful, leaving buyers unaggressive as they continue to purchase at lower prices. Butter inventory is expected to move in line with last year over the next few months. The decline in inventory may be less than usual during the second half of the year.