Tuesday Closing Dairy Market Update - Milk Futures Reflect the Lack of Direction

GENERAL OVERVIEW:

Class III futures lost what was gained over the past three days. The minor strength in dry whey should have provided some support, but the focus was on the steady cheese prices. Butter continued to struggle with buyers holding for lower prices, while sellers were rewarding it.

MILK:

Class III futures continue to have difficulty maintaining strength. The minor strength in dry whey should have provided some support, but the focus was on the steady cheese prices. The inability of prices to increase reinforces the idea that the upside price potential seems limited and prices will remain choppy. There was more volatility today, but trading volume was low. The recent movement of the market has sidelined some traders as it has been difficult to even scalp the market. USDA will release the World Agricultural Supply and Demand report on Wednesday. The main focus will be on the projections for grain production and yield per acre. The report will also contain USDA's estimates for milk production, milk prices, and dairy product prices. The past two reports showed a substantial increase in estimated milk production. The increase is not expected to be as great as the past two months, but it is expected to show an increase in estimated milk output.

AVERAGE CLASS III PRICES:

3 Month:	$17.06
6 Month:	$17.27
9 Month:	$17.34
12 Month:	$17.46

CHEESE:

The spot cheese trading period was void of any interest today. No buyers or sellers showed up to do any business. Likely, the bearish aspect of that was that no buyers wanted anything. Traders focused on the lack of interest. Cheese production remains strong and will continue to do so even with more milk moving to bottling.

BUTTER:

The butter price remains in a choppy downtrend. Manufacturers continue to have sufficient supplies to move to the market. Production is meeting demand without difficulty. Cream has tightened in some areas, but overall remains sufficient for demand.

OUTSIDE MARKETS SUMMARY:

December corn closed down 1.25 cents per bushel at $4.6050, November soybeans closed down 10.75 cents at $11.6875 and December soybean meal closed down $.70 per ton at $310.90. September Chicago wheat closed down 10.25 cents at $6.3025. October live cattle closed down $0.58 at $226.33. September crude oil is up $1.26 per barrel at $83.39. The Dow Jones Industrial Average is down 184 points at 53,792, with the NASDAQ down 160 points at 26,445.

Tuesday Midday Dairy Market Summary - Steady Cheese Prices Trigger Weakness

OUTSIDE MARKETS SUMMARY:

CORN:	2 Lower
SOYBEANS:	11 Lower
SOYBEAN MEAL:	$1.40 Higher
LIVE CATTLE:	$0.75 Lower
DOW JONES:	87 Points Lower
NASDAQ:	140 Points Lower
CRUDE OIL:	$1.06 Higher

MIDDAY MARKET UPDATE:

Both block and barrel cheese prices remained unchanged with no loads traded. The dry whey price increased 0.50 cent to close at 69.75 cents with no loads traded. Traders focused on the inability of cheese prices to post further gains rather than the increase in the dry whey price. Class III futures are 5-35 cents lower. The butter price declined 2.75 cents to close at $1.4700 with 38 loads traded. The uncovered offers remain plentiful with 38 offers remaining at the close of spot trading. However, the number seems to be diminishing over the past two days, but that may not mean much as butter continues to be produced and will be offered to the market. Grade A nonfat dry milk increased 2.00 cents to close at $1.6000 with 15 loads traded. Class IV futures have not yet traded. Butter futures are 4.30 cents lower to 1.00 cent higher. Dry whey futures are 0.02 -- 0.62 cent lower. Cheese futures are steady to 3.10 cents lower. Nonfat dry milk futures are 0.40 -- 1.82 cents higher.

Tuesday Morning Dairy Market Update - Supply and Demand Remain Balanced

OPENING CALLS:

Class III Milk Futures:	Mixed
Class IV Milk Futures:	Mixed
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	Mixed
Soybean Futures:	1 to 2 Lower
Soybean Meal Futures:	Mixed
Wheat Futures:	1 to 2 Higher

MILK:

There was surprising volatility in the August Class III futures contract. The price ranged from a low of $16.45 to a high of $16.69 with a volume of 97 contracts at the time of this writing. The price is currently 15 cents lower. The other contracts traded have shown mixed prices. The light trading interest seen on Monday may be duplicated Tuesday unless there is significant movement in the underlying cash. The overall market seems to be comfortable with current supplies at current prices. There is no concern over a supply shortage and no concern of an oversupply. However, the current supply has kept milk prices low. There does not seem to be much potential for price increases in the near term.

CHEESE:

Cheese prices are expected to remain choppy. Cheese production is steady and providing sufficient supply for demand. Inventories are near the same level as a year ago, indicating demand is keeping up with production. However, supplies remain sufficient, leaving buyers purchasing on an as-needed basis.

BUTTER:

The butter market is struggling to develop an uptrend. Inventory is below a year ago, but there is sufficient supply for demand. Buyers have been able to purchase what they have needed on the spot market without having to be aggressive. Increased demand has been readily met with supply. Choppy prices are expected to continue.