Wednesday Morning Dairy Market Update - Class III Futures Post Further Gains

OPENING CALLS:

Class III Milk Futures:	8 to 15 Higher
Class IV Milk Futures:	Mixed
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	1 to 2 Higher
Soybean Futures:	6 to 8 Higher
Soybean Meal Futures:	Mixed
Wheat Futures:	5 to 7 Higher

MILK:

Milk futures rebounded Tuesday after spot cheese and dry whey prices increased. Not only did Class III futures benefit from the strength, but it spilled over to Class IV futures as well. Class IV futures are in a better position to see further strength due to a bullish posture for butter and nonfat dry milk. However, the fundamentals indicated continued strong milk production that will maintain a sufficient supply of milk for bottling and manufacturing. Demand is good, but without a significant increase in demand, the upside potential for milk prices might be limited.

CHEESE:

Cheese plants are running on full schedules as the milk supply is heavy. Few plants are reaching out to the spot market for extra milk, which keeps spot milk prices at a discount to class. The increase in the spot cheese prices on Tuesday seems due to low prices rather than a change in fundamentals. It just makes sense for buyers to purchase and build inventory.

BUTTER:

The steady butter price did not provide traders with any sense of direction. The six unfilled bids and six uncovered offers that remained at the close of spot trading also provided no direction. Buyers and sellers were at a standoff waiting to see who would move first. The same may be true today.

Tuesday Closing Dairy Market Update - Traders Find Little to Get Excited About

GENERAL OVERVIEW:

Class III milk futures closed steady to higher due to the strength of the spot cheese and dry whey prices. Class IV futures were mixed with contracts through September steady to higher, with later contracts lower. Even with the movement of the underlying cash prices, the market showed little solid direction.

MILK:

The price swings that have been prevalent in spot prices have done little to determine the market direction. The current fundamentals are such that there is little reason to be concerned over the supply of milk. Plentiful milk means there should be a sufficient supply of dairy products for demand. There has been no indication of milk production slowing down. This may leave milk prices with limited upside price potential and could possibly result in the current milk futures prices rolling down as they move close to settlement. Class III futures show the highest price for the year in October at $18.10. Class IV has the highest price in September at $18.12. These are not exceptional prices, but coupled with the high prices received by calves, they would increase profitability significantly from the current level for many farms.

AVERAGE CLASS III PRICES:

3 Month:	$15.86
6 Month:	$16.56
9 Month:	$17.01
12 Month:	$17.14

CHEESE:

The gain in the block cheese price supported the market today, but the potential for a continued increase in price is likely limited. The current fundamentals suggest the best we may hope for is continued choppiness. Without slowing milk production and increased demand, there is little reason for cheese prices to trend higher.

BUTTER:

The spot butter price did not change today, leaving traders uncertain over price direction. This was reflected in butter futures, with contracts closing mixed. There were six unfilled bids and six uncovered offers remaining at the close. This provides little direction for potential trade on Wednesday.

OUTSIDE MARKETS SUMMARY:

March corn closed down 5.50 cents per bushel at $4.2625, March soybeans closed up 1.00 cent at $11.3400, and March soybean meal closed down $3.40 per ton at $305.80. March Chicago wheat closed down 11.00 cents at $5.3775. April live cattle closed up $2.18 at $242.80. March crude oil is down $0.56 per barrel at $62.33. The Dow Jones Industrial Average is up 32 points at 49,533, with the NASDAQ is up 32 points at 22,578.

Tuesday Midday Dairy Market Summary - Block Cheese Price Increased

OUTSIDE MARKETS SUMMARY:

CORN:	5 Lower
SOYBEANS:	1 Higher
SOYBEAN MEAL:	$2.90 Lower
LIVE CATTLE:	$3.55 Higher
DOW JONES:	157 Points Higher
NASDAQ:	100 Points Higher
CRUDE OIL:	$0.47 Lower

MIDDAY MARKET UPDATE:

The block cheese price increased 6.25 cents, closing at $1.45 with six loads traded. The barrel cheese price increased a penny, closing at $1.45 with one load traded. Trading in barrels has been rare since the price was removed from the Federal Order class price calculation. The dry whey price increased 2.00 cents, closing at 74.00 cents with no loads traded. Class III futures turned higher after cheese and the dry whey prices increased, with contracts ranging from 4 cents lower to 19 cents higher, with only the July and November contracts posting losses. The butter price remained unchanged at $1.7050 with four loads traded. Grade A nonfat declined a penny to close at $1.59 with one load traded. Class IV futures are 11 cents lower to 12 cents higher. Butter futures are 2.12 cents lower to 2.27 cents higher. Dry whey futures are 0.17 cent lower to 0.75 cent higher. Cheese futures are 0.20 cent lower to 1.70 cents higher.