Friday, January 15, 2021

Friday Closing Dairy Market Update - Milk Futures Show Little Change From a Week Ago

MILK

Class III milk futures closed strong but were short of reaching back to new highs. Even with all the volatility, February and March futures are lower than a week ago. Optimism returned late Thursday seemingly tied to the potential of another stimulus after President-elect Joe Biden takes office. It will still need to go through Congress and may take a few months, but there is potentially more money will be appropriated for further Food Box programs. The current one that is to begin next week has had limited or no impact on cheese or butter prices as they are lower than when it was announced at the beginning of the year. There will be increased government purchases for regular food programs as a normal part of what is done for those in need. All of this, as well as regular demand, should help to keep inventory from becoming burdensome for cheese. Butter may be a different story. Mild weather has allowed for good cow comfort and increased milk production. There is a wide variation of spot milk prices, particularly in the Midwest, with reports of spot milk prices running as much at $8.50 below class. Some is moving long distances to find manufacturing capacity. Dairy markets will be closed Monday in observance of Martin Luther King Jr. Day. Markets will reopen Monday at 5 p.m. Central Standard Time.

AVERAGE CLASS III PRICES

3 Month: $18.17
6 Month: $18.14
9 Month: $18.01
12 Month: $17.88

CHEESE

For the week, blocks declined 8.75 cents with 13 loads traded. Barrels declined 8 cents, also, with 13 loads traded. Dry whey increased 3 cents with four loads traded. This weakness was a bit of a blow to the anticipation of those who thought cheese prices would follow the pattern of last year and move steadily higher during the fifth round of the Food Box program. Prices may move higher, but there is little indication that it will be a steady trend higher. Some buyers have already set aside some cheese stocks in preparation for filling government purchases for food boxes.

BUTTER

For the week, butter fell 9 cents with 23 loads traded. Grade A nonfat dry milk increased a penny with 43 loads traded. Butter production is increasing, according to USDA's Dairy Market News publication. Stocks of butter are increasing more than had been anticipated. Reduced food service demand is the anchor that is having a substantial impact on price as it moves lower to stimulate buying interest.

OUTSIDE MARKETS SUMMARY

March corn declined 2.75 cents, closing at $5.3150. March soybeans fell 13.75 cents, ending at $14.1675, with March soybean meal down $1.70 per ton, ending at $463.20 per ton. March wheat gained 5.50 cents, closing at $6.7550. February live cattle gained $0.70, closing at $112.77. February crude oil fell $1.21, closing at $52.36 per barrel. The Dow declined 177 points, closing at 30,814, while the NASDAQ fell 114 points, closing at 12,999.




Friday Midday Dairy Market Summary - Block Cheese Falls

Block cheese price fell 7 cents closing at $1.83 with 5 loads traded. Barrel cheese price slipped 0.25 cent ending at $1.5725 with 8 loads traded. The weakness of blocks of this magnitude is a surprise. The influence of the Food Box program seems to have run its course. The influence from the USDA pre-solicitation announced Wednesday for dairy purchases and the hope for more support for dairy from the proposed new stimulus after the new administration takes office, is being overshadowed by actual supply and demand. The cash market is the determining factor of market prices. Butter slipped a penny nearly eliminating the gain of Thursday. Price closed at $1.29 with 13 loads traded. Grade A nonfat dry milk remained steady at $1.20 with 13 loads traded. Dry whey gained 2 cents with 53 cents with one load traded. Class III futures are 1-25 cents higher. Class IV futures are 2 cents to 12 cents higher. Butter futures are 0.55 cents lower to 3.57 cents higher. Dry whey futures are 1.00 cent to 1.52 cents higher.





Friday Morning Dairy Market Update - Trade Mixed Overnight

Opening Calls:

Class III Milk Futures: 10 to 40 Higher
Class IV Milk Futures: 5 to 10 Higher
Butter Futures: 1 to 2 Higher

Outside Market Opening Calls:

Corn Futures: Mixed
Soybean Futures: 6 to 8 Lower
Soybean Meal Futures: Mixed
Wheat Futures: 8 to 16 Higher

Milk:

Late strength came into milk futures late Thursday after market prices had been settled for the day. This pushed February and March limit-up for a brief period. According to overnight trade and current market bids, the market is trading in February where it finished trading near the close of the trading Thursday. March appears to likely trade where it also finished trading Thursday at the close of electronic trading at 4 p.m. CT. Futures did not close at those levels due to the CME market to market shortly after 2 p.m. It has always been that way since electronic trading. It is the same for other markets such as energies, metals, indexes, currencies, etc. There might be some confusion over the catalyst that caused the late strength Thursday. One report indicated it was the pre-solicitation of purchases of $40 million of cheese and processed cheese and $40 million of butter under section 32, which is government purchases for food distribution. These are regular purchases for food programs and not for the Food Box program. The issue is that this notice was released on Wednesday without the market reacting. It seems it might have been influenced in part by the potential for increased government buying even under regular food program purchases as well as the possibility of more demand from government purchases in the proposed new stimulus plan released by President-elect Biden last night. All of this will need to be supported by underlying cash. Hang on to your hats!

Cheese:

Cheese futures look like they will be trading higher also based on current bids in the market with the January contract the exception. January showed 20 trades at a slightly lower price overnight. Spot cheese prices may not move much based on the action so far this week. Whether buyers may turn more aggressive Friday as they take advantage of lower prices and purchase supply is unclear. Dairy markets will be closed Monday.

Butter:

Butter price might follow through to the upside Friday following the bounce Thursday as is generally the pattern when prices bounces. The increase is likely to be limited. The market is dealing with good retail demand but continued slow food service demand. This will be the pattern for much of the year.




Friday Closing Dairy Market Update - Milk Futures Show Little Change From a Week Ago

MILK Class III milk futures closed strong but were short of reaching back to new highs. Even with all the volatility, February and March f...