Wednesday Closing Dairy Market Update - There May Be Little Relief From Low Milk Prices

GENERAL OVERVIEW:

Milk futures closed mostly lower despite the increase in cheese and butter prices. It is uncertain as to why this divergence took place. USDA will release the May Cold Storage and the May Livestock Slaughter reports on Thursday.

MILK:

Spring flush has ended in all areas of the country, but milk production continues to exceed year-earlier levels. This will continue unless there is a significant impact from hot weather throughout the summer. However, advancements have been made with cooling systems that minimize some of the impact of hot weather. Unless there is a Black Swan event, milk prices are expected to remain depressed throughout the rest of the year. USDA will release the May Livestock Slaughter report on Thursday. Slaughter is expected to be in line with the usual level for this time of year, even though cow numbers increased in May according to the milk production report. The May Cold Storage report will also be released, indicating whether demand has kept pace with the production of dairy products.

AVERAGE CLASS III PRICES:

3 Month:	$16.04
6 Month:	$16.63
9 Month:	$16.84
12 Month:	$16.93

CHEESE:

Demand for spot milk from cheese plants is variable. Not because of slower demand, but it is tied to production schedules. Spot milk prices this week range from $4.50 under class to $1.50 over class. Milk receipts from farms have not diminished, but increased manufacturing capacity has resulted in variable interest in spot milk. This may result in cheese production outpacing demand during the time of year when inventory generally decreases.

BUTTER:

The strength of butter was surprising, as only one load was traded. Sellers have been aggressive in the past, and the higher price took place due to the lack of selling interest. Traders did not react to the price increase, with most butter futures contracts lower.
Traders anticipate the bounce in the price will be short-lived.

OUTSIDE MARKETS SUMMARY:

July corn closed down 2.75 cents per bushel at $4.0700, November soybeans closed down 6.75 cents at $11.3500, and July soybean meal closed up $0.70 per ton at $303.60. September Chicago wheat closed down 1.00 cent at $5.9600. August live cattle closed up $0.53 at $246.53. August crude oil is down $3.34 per barrel at $69.87. The Dow Jones Industrial Average is up 102 points at 51,849, with the NASDAQ down 110 points at 25,477.

Wednesday Midday Dairy Market Summary - Futures Decline Despite Higher Cash

OUTSIDE MARKETS SUMMARY:

CORN:	2 Lower
SOYBEANS:	6 Lower
SOYBEAN MEAL:	$1.30 Higher
LIVE CATTLE:	$0.85 Higher
DOW JONES:	118 Points Higher
NASDAQ:	122 Points Lower
CRUDE OIL:	$2.73 Lower

MIDDAY MARKET UPDATE:

The block cheese price increased 2.50 cents to close at $1.4400 with 26 loads traded. There were 3 unfilled bids and 1 uncovered offer remaining. The barrel cheese price increased 1.75 cents to close at $1.4775 with no loads traded. The dry whey price remained unchanged at 68.50 with no loads traded. Class III futures are 19 cents lower to 2 cents higher, with most contracts posting losses. One would think that futures would be higher with the strength, but traders think it will be short-lived. The butter price increased 5.00 cents to close at $1.5250 with 1 load traded. There were 19 unfilled bids and 5 uncovered offers remaining at the close. Grade A nonfat dry milk decreased 2.50 cents to close at $1.5750 with 11 loads traded. Class IV futures are 9 cents lower to a penny higher. Butter futures are 2.50 cents lower to 2.00 cents higher. Dry whey futures are steady to 0.25 cent lower. Cheese futures are steady to 1.70 cents lower. Nonfat dry milk futures are 0.40 cent lower to 0.42 cent higher.

Wednesday Morning Dairy Market Update - Unusual Overnight Trading Activity

OPENING CALLS:

Class III Milk Futures:	4 to 7 Lower
Class IV Milk Futures:	4 to 8 Lower
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

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

MILK:

There was unusual trading activity in the overnight markets. The July, August, and September Class III contracts traded, which is not unusual, but traded activity also took place in the January through June 2027 contracts, which is unusual. The same number of contracts traded in each 2027 contract, suggesting one trader was selling the strip, and one was buying. Unfortunately, prices were unchanged to 25 cents lower. Class IV futures had one contract traded in nearby June. This is unusual as the June contract has mostly been priced and generally moves very little until the class prices are announced. Being a cash-settled market, it is surprising that the price would trade 23 cents lower. This certainly does not look positive for the day.

CHEESE:

There is little anticipation of much strength in spot cheese anytime soon. Any price bounce has been short-lived, with the pattern expected to continue. Buyers are not building inventory, and sellers want to keep inventory from building.

BUTTER:

Manufacturers are selling what they are producing at whatever price they can get. Buyers see this and continue lowering bids, with no need to purchase aggressively. Current demand is being met with limited interest in building inventory for later demand. Price support remains elusive.