Tuesday Closing Dairy Market Update - Milk Prices Continue to Diverge

GENERAL OVERVIEW:

It was another dismal day for Class III milk futures as the block cheese price moved to a six-year low. The October contract fell below $15.00. The September futures contracts ceased trading, with the Federal Order class prices to be announced on Wednesday.

MILK:

Class III milk futures were under significant pressure again today in response to the decline in the block cheese price. The dry whey price is minimizing the weakness as it continues to increase, moving to the highest level since February 22, 2022. The low milk prices are beginning to have more impact as the calf prices are not making up for the decline in milk income. This may increase culling primarily on small dairy farms initially before triggering increased culling on large dairy farms. Class IV futures were strong as traders focused on the strength in nonfat dry milk rather than the weakness in butter. The spread between Class III and Class IB futures continues to widen. The September Federal Order class prices will be released on Wednesday. The trade anticipates a Class III price of $16.01 and a Class IV price of $19.08.

AVERAGE CLASS III PRICES:

3 Month:	$15.26
6 Month:	$15.84
9 Month:	$16.24
12 Month:	$16.55

CHEESE:

The block cheese price fell to the lowest level since May 5, 2020. The expansion of milk production, as cows continued to be added, is providing plentiful milk for manufacturing. The low prices have not yet increased demand sufficiently to tighten supply. Buyers are complacent, seeing no reason to purchase aggressively, which could result in building supply at a time when they do not need to.

BUTTER:

The butter price continues to struggle as butter production increases due to increased cream supplies. Inventory in August declined seasonally, but the decline was less than usual. This has resulted in butter in cold storage being 10% above a year ago.

OUTSIDE MARKETS SUMMARY:

December corn closed down 1.00 cent per bushel at $5.2200, November soybeans closed up 9.50 cents at $12.9775, and December soybean meal closed down $.40 per ton at $359.00. December Chicago wheat closed up 4.00 cents at $6.9275. December live cattle closed unchanged. November crude oil is down $3.66 per barrel at $88.94. The Dow Jones Industrial Average is down 132 points at 51,350, with the NASDAQ down 23 points at 26,798.

Tuesday Midday Dairy Market Summary - Block Cheese Falls to Six-Year Low

OUTSIDE MARKETS SUMMARY:

CORN:	1 Higher
SOYBEANS:	14 Higher
SOYBEAN MEAL:	$2.30 Higher
LIVE CATTLE:	$0.62 Higher
DOW JONES:	313 Points Lower
NASDAQ:	73 Points Lower
CRUDE OIL:	$2.08

MIDDAY MARKET UPDATE:

The block cheese price fell 3.25 cents to close at $1.2750 with 6 loads traded. This is the lowest price since May 5, 2020. There was one unfilled bid and 4 uncovered offers remaining at the close of spot trading. The barrel price continues to remain unchanged at $1.4525 with no activity. The dry whey price increased 0.50 cent to close at 81.00 cents with one load traded. This is the highest price since February 22, 2022. Class III futures are under pressure, with the October contract falling below $15.00. The butter price fell 5.25 cents to close at $1.3175 with 19 loads traded. There were 41 unfilled bids and 15 uncovered offers remaining at the close of spot trading. The price may be getting low enough to increase buyer interest. Grade A nonfat dry milk increased 1.25 cents to close at $2.1925 with 4 loads traded. Class III futures are 3-24 cents higher. Butter futures are 3.10 -- 7.50 cents lower. Dry whey futures are 0.25 cent lower. Cheese futures are 0.40 -- 2.90 cents lower. Nonfat dry milk futures are 1.72 -- 4.00 cents higher. The September dairy futures and options have finished trading. 

Tuesday Morning Dairy Market Update - Fundamentals Show Little Change

OPENING CALLS:

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

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	Steady to 1 Lower
Soybean Futures:	Mixed
Soybean Meal Futures:	$2 to $3 Lower
Wheat Futures:	4 to 5 Lower

MILK:

Class III futures showed significant weakness on Monday despite steady cheese and dry whey prices. Traders see little reason for price strength in the near term. Increasing milk production with sufficient supplies for bottling and manufacturing is keeping end-users complacent. Increased plant capacity is absorbing higher milk production without difficulty. Some plants have expanded capacity without taking on additional patrons, with expansions of current patrons filling the extra capacity. Carthage, Missouri, will be the site of a $276 million cheese plant operated by Schrieber Foods. It is expected to be operational in 2028. Today is the last day to trade September dairy futures and options, with the Federal Order prices to be announced on Wednesday.

CHEESE:

There is little anticipation that cheese prices will trend higher anytime soon. Any price increase will be short-lived. Increasing milk receipts at the plant level will keep production strong and cheese available to the market.

BUTTER:

Significant volumes of butter continue to be offered on the daily spot market. Buyers do not need to be aggressive as plants are willing to sell at lower prices.