Wednesday Closing Dairy Market Update - Spot Milk Prices Strengthen

GENERAL OVERVIEW:

Milk futures moved relative to the direction of the underlying cash. Block cheese weakness resulted in lower Class III futures, while the strength of nonfat dry milk showed higher Class IV futures.

MILK:

There was more milk available for processing this week due to many plants running on reduced schedules over the holiday weekend. However, spot milk prices actually showed strength, ranging from $3.00 under class to as much as $2.00 over class. Reduced milk production due to the impact of hot weather has some plants reaching out to the spot market to maintain full production schedules. The milk supply has not tightened to the degree to cause supply concerns. In fact, it is not expected to reach that level even though milk production is decreasing. Increased volatility in Class III futures today did not result in greater trading volume.

AVERAGE CLASS III PRICES:

3 Month:	$16.17
6 Month:	$16.81
9 Month:	$16.99
12 Month:	$17.07

CHEESE:

The slight decrease in the block cheese price today quickly turned Class III futures lower. It is too early to tell whether the price could move back down to the level of last week or if it may be supported at a higher level. Buying interest should improve as end users look ahead to demand later in the year, even though the milk supply is sufficient for cheese production.

BUTTER:

The churning pace is beginning to decrease as the cream supply declines. There are some reports of plants moving to five days per week, which may provide support to the market as domestic retail demand and international demand remain strong. There is some concern over the export volume as the butter price at the Global Dairy Trade auction decreased 5.0% on Tuesday. The world price is still $0.77 per pound above the U.S. price, but there is concern the export pace might slow.

OUTSIDE MARKETS SUMMARY:

December corn closed down 8.00 cents per bushel at $4.5625, November soybeans closed down 5.50 cents at $11.9225, and December soybean meal closed down $5.30 per ton at $311.20. September Chicago wheat closed down 10.75 cents at $6.0775. August live cattle closed down $0.80 at $237.63. August crude oil is up $4.15 per barrel at $74.59. The Dow Jones Industrial Average is down 562 points at 52,348, with the NASDAQ up 52 points at 25,871.

Wednesday Midday Dairy Market Summary - Spot Trading Shows Little Direction

OUTSIDE MARKETS SUMMARY:

CORN:	7 Lower
SOYBEANS:	6 Higher
SOYBEAN MEAL:	$5.60 Lower
LIVE CATTLE:	$2.12 Lower
DOW JONES:	598 Points Lower
NASDAQ:	48 Points Lower
CRUDE OIL:	$3.83 Higher

MIDDAY MARKET UPDATE:

The block cheese price slipped 0.50 cent to close at $1.5050 with no loads traded. The barrel cheese price remained unchanged at $1.5200 with no loads traded. The dry whey price remained unchanged at 67.50 with no loads traded. Class III futures were mixed prior to spot trading but have come under slight pressure following the decline of blocks. The butter price remained steady at $1.6500 with 30 loads traded. Grade A nonfat dry milk increased 2.50 cents to close at $1.50 with 8 loads traded. Class IV futures are 12 cents lower to 18 cents higher. Butter futures are 2.92 cents lower to 0.50 cent higher. Dry whey futures are 0.25 cent lower to 1.00 cent higher. Cheese futures are 1.50 cent lower to 0.10 cent higher. Nonfat dry milk futures are 0.37 -- 3.02 cents higher.

Wednesday Morning Dairy Market Update - Uncertainty Continues

OPENING CALLS:

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

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	1 to 2 Lower
Soybean Futures:	2 to 10 Higher
Soybean Meal Futures:	$3 to $4 Lower
Wheat Futures:	2 to 4 Higher

MILK:

There is not much market excitement to generate significant volatility. The increase in spot cheese prices supported Class III futures on Tuesday, but did not generate significant buying interest or short covering. Traders are not heavily long or short in futures, leaving any reaction to price changes in underlying cash limited. Traders continue to trade short-term in an attempt to take a small profit if their guess is correct. The dairy herd continues to increase and will keep sufficient milk available to the market even though hot weather will impact milk output.

CHEESE:

The bounce in spot cheese prices on Tuesday was welcomed, but it did not trigger aggressive buying interest in the futures maket. Follow-through buying did not take place in the overnight market. Traders remain cautious over the potential of prices. The market will need to prove itself before traders turn bullish. The substantial decline in the cheddar cheese price during the GDT auction on Tuesday does not provide support for the market.

BUTTER:

Cream supplies have declined, but the market has not tightened. End users are not concerned over supplies. Sellers continue to offer significant volumes of butter to the spot market. This will limit the increase in inventory, but supply should remain sufficient for demand.