Tuesday Closing Dairy Market Update - Traders Showed Disappointment Over Spot Prices

GENERAL OVERVIEW:

Milk futures showed weakness due to traders' disappointment that spot prices did not increase as much as anticipated. This may be temporary, or it could indicate that cheese prices may have a price threshold. The April Federal Order prices will be released on Wednesday.

MILK:

Milk futures showed weakness, with most contracts posting double-digit losses. Underlying cash prices did not post weakness, with cheese prices steady and butter, nonfat dry milk and dry whey prices showing minor gains. Traders needed to see greater gains, and without those gains, they decided to bank some profits in case weakness surfaced. Increasing milk production due to the spring flush season, and output remaining significantly higher than a year ago, may limit the upside price potential. Even with the decline in futures today, prices have retained a good portion of the gains seen recently. The April Federal Order class prices will be released on Wednesday. The trade anticipates a Class III price of $16.85 and a Class IV price of $20.20.

AVERAGE CLASS III PRICES:

3 Month:	$18.19
6 Month:	$18.68
9 Month:	$18.56
12 Month:	$18.36

CHEESE:

The block cheese price is near the high it established earlier in the month. This may cap the price potential as buyers may not want to be active and aggressive buyers at the high. There is a plentiful milk supply available for cheese production. This eliminates the concern over supplies tightening anytime soon. Most manufacturers are operating on full schedules with limited purchasing of milk from the spot market.

BUTTER:

The spot butter price increased slightly, but it took some time for traders to react in the futures market. Early losses were finally eliminated, as traders decided to cover some short positions. The minor strength in butter does not indicate support has been established, as the pattern has been that an increase in the spot price has been short-lived and resulted in lower prices. This will keep traders cautious unless proven otherwise.

OUTSIDE MARKETS SUMMARY:

July corn closed up 6.25 cents per bushel at $4.7550, July soybeans closed down 2.75 cents at $11.8925, and July soybean meal closed down $.40 per ton at $327.40. July Chicago wheat closed up 28.00 cents at $6.5775. June live cattle closed up $4.55 at $253.50. June crude oil is up $3.56 per barrel at $99.93. The Dow Jones Industrial Average is down 26 points at 49,142, with the NASDAQ down 223 points at 24,664.

Tuesday Midday Dairy Market Summary - Milk Futures Fall Back

OUTSIDE MARKETS SUMMARY:

CORN:	4 Higher
SOYBEANS:	3 Lower
SOYBEAN MEAL:	$0.20 Lower
LIVE CATTLE:	$3.05 Higher
DOW JONES:	38 Points Higher
NASDAQ:	273 Points Lower
CRUDE OIL:	$3.66 Higher

MIDDAY MARKET UPDATE:

Both block and barrel cheese prices remained unchanged at $1.6525 and $1.6150, respectively. There were no loads traded in either category. The dry whey price increased 0.50 cent to close at 70.75 cents with one load traded. Class III futures were higher earlier but are currently trading 8-25 cents lower. The butter price increased 0.75 cent, closing at $1.6950 with 10 loads traded. The price initially declined to $1.6775 before buyers turned more aggressive, pushing the price into positive territory. Grade A nonfat dry milk increased 0.50 cent to $2.2650 and is a new record high price. There were two loads traded. Class IV futures are 32 cents lower to 5 cents higher. Butter futures are 1.85 cents lower to 1.35 cents higher. Dry whey futures are 0.35-0.52 cent higher. Cheese futures are 0.70-2.20 cents lower. The April futures and options have ceased trading, with May taking over as the lead month.

Tuesday Morning Dairy Market Update - Strong Overnight Trading Activity

OPENING CALLS:

Class III Milk Futures:	2 to 5 Higher
Class IV Milk Futures:	Mixed
Butter Futures:	1 to 2 Higher

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	3 to 5 Higher
Soybean Futures:	Mixed
Soybean Meal Futures:	$1 to $2 Higher
Wheat Futures:	12 to 14 Higher

MILK:

Trading activity was unusually high in the overnight market. Activity took place in all Class III contracts through the end of the year. It is surprising to see the trading activity in the April contract, as Tuesday is the last day to trade April futures and options. There is no need to offset positions by the end of the contract period due to it being a cash-settled market. Minor trading activity was seen in Class IV futures, making it a second day of unusual overnight activity. Most contracts traded at a higher price, indicating further optimism Tuesday.

CHEESE:

Cheese prices have maintained support with prices nearing the upper end of the price range. It may be difficult for the price to exceed the previous high under the current market. Cheese production remains strong and increasing due to high milk receipts at the plant level. Demand has been steady, limiting inventory build.

BUTTER:

Butter has been unable to find support, with any price increase being short-lived. This has kept the market in a downtrend. The butter supply is below a year ago, but that is meaningless as long as manufacturers continue to offer loads on the spot market. Even though inventory is below a year ago, there is sufficient supply for demand, with buyers unconcerned.