Monday Closing Dairy Market Update - December Income Over Feed Was $9.58

GENERAL OVERVIEW:

Class III milk futures remained under pressure despite the increase in the block cheese price. Class IV futures maintained some strength until later in the day when futures began weakening. The average soybean meal price for December was released, which resulted in an income over feed price of $9.58.

MILK:

Milk futures did not fare well today despite the increase in the block cheese price and a steady butter price. It seems as if traders are trading contrary to the underlying cash with the intent of creating volatility. Of course, the cash price swings cause futures to move outside the realm of where the price correlation is and move futures further up or down more than they should. This causes prices to correct to where the correlation should be, despite spot price movements during the day. The average soybean meal price for December was released this morning. The price for December was $311.93 per ton, down $18.94 per ton from November. This results in an income over feed price of $9.58. There will be no DMC payment for the month. Tuesday is the last trading day for January futures and options, with the Federal Order prices announced on Wednesday. The low milk prices that will be seen for January will result in a DMC payment.

AVERAGE CLASS III PRICES:

3 Month:	$15.34
6 Month:	$16.08
9 Month:	$16.62
12 Month:	$16.89

CHEESE:

The bounce in the spot block price is meaningless and just a matter of business being done. The volume of loads traded is positive, indicating good demand interest. However, the selling interest is an indication of sufficient supplies being available for demand. Cheese prices are expected to be choppy at best.

BUTTER:

At least the butter price held today, but unfortunately, it did not increase. Traders took more premiums out of butter futures. The consensus is that the butter price may have limited upside potential, but traders are cautious. Lower inventory in December was a surprise due to abundant cream supplies and heavy butter output. This may support the price at a higher level.

OUTSIDE MARKETS SUMMARY:

March corn closed down 2.50 cents per bushel at $4.2575, March soybeans closed down 4.00 cents at $10.6025, and March soybean meal closed up $.90 per ton at $294.50. March Chicago wheat closed down 10.25 cents at $5.2775. April live cattle closed up $2.73 at $239.53. March crude oil is down $2.90 per barrel at $62.31. The Dow Jones Industrial Average is up 515 points at 49,408, with the NASDAQ is up 130 points at 23,592.

Monday Midday Dairy Market Summary - Block Cheese Gains, Class III Futures Fall

OUTSIDE MARKETS SUMMARY:

CORN:	3 Lower
SOYBEANS:	5 Lower
SOYBEAN MEAL:	$0.90 Higher
LIVE CATTLE:	$3.15 Higher
DOW JONES:	458 Points Higher
NASDAQ:	197 Points Higher
CRUDE OIL:	$3.31 Lower

MIDDAY MARKET UPDATE:

The block cheese price increased by 2.25 cents to close at $1.3850 with 11 loads traded. The barrel cheese price remained unchanged at $1.39 with no loads traded. The dry whey price declined a penny, closing at 74.00 cents with one load traded. Class III futures are 2-55 cents lower. The butter price remained unchanged at $1.58 with no loads traded. There was an unfilled bid remaining at the close of spot trading. Grade A nonfat dry milk was unchanged at $1.46 with no loads traded. Class IV futures are 3 cents lower to 33 cents higher. Butter futures are 3.85 cents lower to 1.25 cents higher. Dry whey futures are 0.90 cent lower to 1.00 cents higher. Cheese futures are steady to 4.90 cents lower.

Monday Morning Dairy Market Update - Traders Anticipate Higher Spot Prices

OPENING CALLS:

Class III Milk Futures:	5 to 12 Higher
Class IV Milk Futures:	5 to 10 Higher
Butter Futures:	2 to 3 Higher

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	1 to 2 Lower
Soybean Futures:	4 to 6 Lower
Soybean Meal Futures:	$0.50 to $1 Higher
Wheat Futures:	4 to 5 Lower

MILK:

The anticipation is for higher underlying cash prices Monday. Class III milk futures are higher as traders anticipate cheese prices may move similarly to what they did a week ago -- when the butter price jumped. Cheese prices followed suit. This seems to be the expectation for Monday. The fundamentals have not changed much, but buyers in the spot market have turned more aggressive when they need to buy. Buyers seem to be comfortable with the supply of milk, but are becoming increasingly cautious over the potential of some announcement of a program that could tighten the milk supply. However, with expansion taking place and cow numbers increasing, it may be difficult to change the supply quickly or at all.

CHEESE:

There is sufficient cheese available in the market, which will limit the upside potential for prices. However, when buyers turn aggressive, it will bring greater buying interest into the market as others will step up in fear of having to purchase at higher prices. Even though this time of year generally sees slower demand, buyers will want to purchase at lower prices and may do so aggressively.

BUTTER:

The large increase in the butter price on Friday may see follow-through buying Monday. Overall demand is good and better than expected due to the decline of inventory in December and supplies ending the year 7.0% below the previous year.