Wednesday Morning Dairy Market Update - June Milk Production Report Due Today

OPENING CALLS:

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

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	4 to 6 Higher
Soybean Futures:	3 to 5 Higher
Soybean Meal Futures:	$1 to $2 Higher
Wheat Futures:	10 to 12 Higher

MILK:

Trading in milk futures was active overnight with Class III contracts through December showing activity. Traders are expected to remain cautious ahead of spot trading now that the block cheese price reached the high of May 6. The level holds no specific influence other than the fact that the price fell substantially thereafter in May. The USDA will release the June Milk Production report Wednesday. I estimate milk production to be 2.2% higher than a year ago and cow numbers to be 4,000 head higher than May. If there was any significant impact from hot weather, it will not show up until the July report to be released in August.

CHEESE:

Cheese prices have increased steadily and significantly over the past weeks. Buyers have been more aggressive in the spot market as they look ahead to upcoming demand and want to increase their supplies at lower prices rather than take a chance on higher prices later in the year. Traders will exercise caution as the market generally declines faster than it gains, but the time of year may minimize any price weakness.

BUTTER:

The butter price has been struggling. The weakness has been somewhat of a surprise due to cream supplies tightening and churn schedules reduced to five days a week. Retail demand is steady. Seasonal buying has not yet surfaced to support the price. There is an expectation that this may increase next month. Manufacturers continue to sell butter to manage the build of inventory at the plant level.

Tuesday Closing Dairy Market Update - U.S. Implements Import Tariffs on Canadian Dairy Products

GENERAL OVERVIEW:

Milk futures diverged with Class III contracts higher and Class IV lower following the direction of the underlying cash. Trading volume in Class III futures was good. The U.S. imposed a 50% tariff on products for Canada. The June Milk Production report will be released tomorrow.

MILK:

Class III futures regained about half of their losses from Monday even though the block cheese price increased 3 cents and should have provided further support. The losses on Monday might be regained as the week progresses. Class IV futures showed pressure, moving contracts further below those of Class III. The June Milk Production report will be released on Wednesday. I estimate milk production to be up 2.2% from a year ago with cow numbers up 4,000 head from May. Trade tensions with Canada increased Monday as the U.S. imposed 50% tariffs on a wide range of Canadian goods, directly targeting key economic sectors including alcohol, dairy products, cars, seeds, floriculture products, flower bulbs, lumber and animal products. At the center of the dispute is a long-standing friction over Canada's dairy supply management system and its handling of tariff-rate quotas for imported cheese and milk protein products. Washington charges that Canadian regulatory agencies continuously manipulate access for U.S. dairy products to shield domestic processors. The new 50% import duties follow direct pressure from major U.S. agricultural groups such as the National Milk Producers Federation and the Dairy Export Council, which have demanded retaliatory action for non-compliance.

AVERAGE CLASS III PRICES:

3 Month:	$16.91
6 Month:	$17.29
9 Month:	$17.33
12 Month:	$17.36

CHEESE:

The block cheese price matched the high reached on May 6. The price fell substantially after that date. It is not anticipated to follow the same pattern, as it is a different time of year. Market fundamentals are much the same, but buyer interest generally increases for upcoming fall and holiday demand. If the price moved another 1.50 cents higher, it would then be back to the highest level since October 31.

BUTTER:

The rebound of spot butter from the low today does not necessarily indicate that support has been found. The movement was just a matter of buyers and sellers doing business. The continued weakness of Grade A nonfat dry milk will remain an anchor on Class IV futures.

OUTSIDE MARKETS SUMMARY:

December corn closed up 2.25 cents per bushel at $4.7525, November soybeans closed down 3.50 cents at $12.2275, and December soybean meal closed up $3.50 per ton at $327.30. September Chicago wheat closed up 4.00 cents at $6.7800. October live cattle closed down $0.08 at $223.23. September crude oil is up $1.86 per barrel at $84.34. The Dow Jones Industrial Average is up 375 points at 52,214, with the NASDAQ up 329 points at 25,837.

Tuesday Midday Dairy Market Summary - Block Cheese Shows Further Strength

OUTSIDE MARKETS SUMMARY:

CORN:	4 Higher
SOYBEANS:	9 Lower
SOYBEAN MEAL:	$2.90 Higher
LIVE CATTLE:	$0.12 Higher
DOW JONES:	436 Points Higher
NASDAQ:	349 Points Higher
CRUDE OIL:	$2.05 Higher

MIDDAY MARKET UPDATE:

The block cheese price increased 3.00 cents to close at $1.6600 with 3 loads traded. The barrel cheese price remained unchanged at $1.6275 with no loads traded. The dry whey price increased 0.25 cent to close at 69.75 cents with no loads traded. Class III futures traded mixed until spot trading and are now 4 cents lower to 22 cents higher, with the April contract showing the only loss. The butter price increased 0.25 cent to close at $1.5750 with 12 loads traded. The price initially declined to $1.5600 before buyers became more aggressive, with the price regaining the loss. Grade A nonfat dry milk decreased 2.00 cents to close at $1.4300 with 25 loads traded. The price initially declined 3.00 cents before retracing some of the loss. Class IV futures are 10-19 cents lower. Butter futures are 0.65 -- 5.50 cents lower. Dry whey futures are 0.45 cent lower to 1.45 cents higher. Cheese futures are steady to 1.70 cents higher. Nonfat dry milk futures are 0.42 to 1.42 cents lower.