Tuesday Closing Dairy Market Update - Limited Volatility Results in Lower Prices

GENERAL OVERVIEW:

Most milk futures contracts closed lower despite the strength in the cheese and dry whey spot prices. Barrels have been showing more price movement and trading activity recently as demand improves and sellers are willing to move some supplies.

MILK:

It was another one of those days in which one would have thought Class III milk prices would have been higher. The strength in the cheese and dry whey prices should have provided further support. However, the increases of the past few days have already factored in the strength, resulting in traders who had previously bought into the market taking profits. This has been a pattern for quite some time, as much of the trading that is being done is short-term trading. Further weakness could unfold as selling generally takes place over two days before traders step back into the market in an attempt to trade market movement. The market sentiment seems to have turned somewhat bullish as buyer interest in cheese seems to be improving.

AVERAGE CLASS III PRICES:

3 Month:	$16.70
6 Month:	$17.23
9 Month:	$17.29
12 Month:	$17.33

CHEESE:

There has been more trading activity in barrels recently as buyers and sellers are willing to do more business on the spot market. For quite some time, there had been very little spot trading activity. Some of that limited activity was the result of the barrel price being removed from the Federal Order price calculation. It is uncertain as to why this was the case, but it seemed buyers and sellers were accomplishing their business outside of the daily spot market.

BUTTER:

The volatility of butter has declined substantially over the past two weeks. This indicates that current supply and demand seem to be balanced. Buyers have not had to aggressively bid for supplies. Sufficient butter is available through other channels.

OUTSIDE MARKETS SUMMARY:

December corn closed down 2.75 cents per bushel at $4.6050, November soybeans closed down 3.75 cents at $11.9100, and December soybean meal closed up $1.30 per ton at $316.30. September Chicago wheat closed up 9.75 cents at $6.4500. August live cattle closed down $3.30 at $231.43. August crude oil is up $1.20 per barrel at $79.34. The Dow Jones Industrial Average is up 10 points at 52,508, with the NASDAQ up 234 points at 26,107.

Tuesday Midday Dairy Market Summary - Higher Cheese and Dry Whey Prices Fail to Support Futures

OUTSIDE MARKETS SUMMARY:

CORN:	2 Lower
SOYBEANS:	4 Lower
SOYBEAN MEAL:	$0.50 Higher
LIVE CATTLE:	$2.82 Lower
DOW JONES:	41 Points Lower
NASDAQ:	271 Points Higher
CRUDE OIL:	$0.91 Higher

MIDDAY MARKET UPDATE:

The block cheese price increased 0.50 cent to close at $1.6050 with 8 loads traded. The barrel cheese price increased 4.00 cents to close at $1.6000 with 3 loads traded. The dry whey price increased 2.00 cents to close at 70.00 cent with 3 loads traded. Class III futures are 13 cents lower to 1 cent higher. Futures had the gains already factored in, which provided the opportunity for traders to take a short-term profit after 2 days of gains. The butter price remained unchanged at $1.6400 with no loads traded. Grade A nonfat dry milk decreased 2.50 cents to close at $1.5275 with 13 loads traded. Class IV futures are 8-21 cents lower. Butter futures are steady to 2.22 cents lower. Dry whey futures are 0.15 -- 0.50 cent higher. Cheese futures are 1.20 cents lower to 0.50 cent higher. Nonfat dry milk futures are 1.40 cents lower to 0.92 cent higher.

Tuesday Morning Dairy Market Update - Milk Futures May Pull Back Ahead of Spot Trading

OPENING CALLS:

Class III Milk Futures:	5 to 12 Higher
Class IV Milk Futures:	Mixed
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	5 to 6 Lower
Soybean Futures:	6 to 8 Lower
Soybean Meal Futures:	$2 to $3 Lower
Wheat Futures:	4 to 6 Lower

MILK:

The strength of Monday in Class III futures may carry over Tuesday ahead of spot trading. The buying that took place Monday is likely traders getting into the market in an attempt to take a short-term profit. It would not be surprising to see futures come under some selling pressure ahead of spot trading to bank those profits in the event cheese prices slip back. Higher futures prices are welcome and hopefully the market will find further support. The nearby July contract is nearly priced and will move mainly based on the weekly AMS dairy product prices report. Class III futures are holding a premium in subsequent contracts, while Class IV futures are mostly the same through the end of the year.

CHEESE:

Cheese buyers have turned more aggressive. Demand is good and buyers are looking ahead to prepare for demand later in the year. There is concern the upside price potential may be limited as there is not a shortage of milk moving to the vat. However, increasing prices may bring more buyers from the sidelines to purchase before prices move higher, adding to the strength.

BUTTER:

Butter has not found the support cheese has recently shown. That does cause concern as the butter market has generally been the leader of price direction for cheese. Buyers of butter have been able to purchase sufficient supplies for demand with some reports that inventory is beginning to build slightly.