Wednesday Morning Dairy Market Update - Uncertainty Continues

OPENING CALLS:

Class III Milk Futures:	Mixed
Class IV Milk Futures:	4 to 8 Lower
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	1 to 2 Lower
Soybean Futures:	2 to 10 Higher
Soybean Meal Futures:	$3 to $4 Lower
Wheat Futures:	2 to 4 Higher

MILK:

There is not much market excitement to generate significant volatility. The increase in spot cheese prices supported Class III futures on Tuesday, but did not generate significant buying interest or short covering. Traders are not heavily long or short in futures, leaving any reaction to price changes in underlying cash limited. Traders continue to trade short-term in an attempt to take a small profit if their guess is correct. The dairy herd continues to increase and will keep sufficient milk available to the market even though hot weather will impact milk output.

CHEESE:

The bounce in spot cheese prices on Tuesday was welcomed, but it did not trigger aggressive buying interest in the futures maket. Follow-through buying did not take place in the overnight market. Traders remain cautious over the potential of prices. The market will need to prove itself before traders turn bullish. The substantial decline in the cheddar cheese price during the GDT auction on Tuesday does not provide support for the market.

BUTTER:

Cream supplies have declined, but the market has not tightened. End users are not concerned over supplies. Sellers continue to offer significant volumes of butter to the spot market. This will limit the increase in inventory, but supply should remain sufficient for demand.

Tuesday Closing Dairy Market Update - GDT Average Price Declined 4.9%

GENERAL OVERVIEW:

Class III and IV futures diverged, with Class III contracts higher while Class IV contracts declined. The Global Dairy Trade auction trade-weighted average declined by 4.9%.

MILK:

Class III milk futures received a little boost today. Traders responded to the increase in cheese prices. However, the gains were limited as traders are uncertain over the duration of the strength. More aggressive buying could be from the hotter weather predicted in many areas as well as the strong gains in grain prices over the past two days. There has always been a correlation between the corn price and the milk price. This correlation does not follow immediately and in all cases, but when traders are looking for something to move the market, this could be it. The Global Dairy Trade auction took place today, with the trade-weighted average declining 4.9% from the previous event. There were 26,316 metric tons sold at an average price of $3,793 per metric ton. This was an unusually large amount and about double what it has been the past few events. The anhydrous milk fat price decreased 3.9% to $6,341 per metric ton or $2.88 per pound. Butter declined 5.0% to $5,336 per metric ton or $2.42 per pound. Buttermilk powder gained 8.2% to $3,786 per metric ton or $1.72 per pound. Cheddar cheese fell 12.3% to $3,900 per metric ton or $1.77 per pound. Lactose declined 3.6% to $1,732 per metric ton or $0.79 per pound. Skim milk powder declined 7.0% to $3,135 per metric ton or $1.42 per pound. Whole milk powder declined 4.4% to $3,425 per metric ton or $1.55 per pound. Mozzarella cheese gained 3.8% to $3,897 per metric ton or $1.77 per pound.

AVERAGE CLASS III PRICES:

3 Month:	$16.29
6 Month:	$16.90
9 Month:	$17.05
12 Month:	$17.12

CHEESE:

The strength of spot cheese prices was a little surprising due to sufficient supplies available to the market. Buyers were aggressive in purchasing what was offered even at higher prices. To end-users, it might have made sense to purchase at the lower prices rather than risk waiting and end up paying more for cheese later. There is a time when reasonable prices need to be taken advantage of rather than guessing the strength of the market.

BUTTER:

There was no trading activity, leaving the price unchanged from Monday. The 25 uncovered offers remaining at the close suggest limited upside price potential in the near term.

OUTSIDE MARKETS SUMMARY:

December corn closed up 6.50 cents per bushel at $4.6425, November soybeans closed up 5.50 cents at $11.9775, and December soybean meal closed up $3.00 per ton at $316.50. September Chicago wheat closed up 4.50 cents at $6.1850. August live cattle closed down $0.68 at $238.43. August crude oil is up $3.37 per barrel at $71.92. The Dow Jones Industrial Average is down 131 points at 52,925, with the NASDAQ down 302 points at 25,819.

Tuesday Midday Dairy Market Summary - Cheese Prices Bounce

OUTSIDE MARKETS SUMMARY:

CORN:	3 Higher
SOYBEANS:	6 Higher
SOYBEAN MEAL:	$1.70 Higher
LIVE CATTLE:	$1.05 Lower
DOW JONES:	126 Points Lower
NASDAQ:	170 Points Lower
CRUDE OIL:	$2.09 Higher

MIDDAY MARKET UPDATE:

The block cheese price increased 6.25 cents to close at $1.51 with 11 loads traded and one unfilled bid remaining. The barrel cheese price increased 3.50 cents to close at $1.52 with no loads traded. No sellers showed up to the spot market. The dry whey price slipped 0.25 cent to close at 67.25 with no loads traded. Class III futures are steady to 36 cents higher, with the August contract showing the greatest gain. The butter price remained unchanged at $1.6500 with no loads traded. There was an unfilled bid and 25 uncovered offers remaining at the close of spot trading. Grade A nonfat dry milk decreased 2.50 cents to close at $1.4750 with 3 loads traded. This is the lowest price since February 2. Class IV futures are 40 cents lower to 6 cents higher. Butter futures are 0.55 cent lower to 0.75 cent higher. Dry whey futures are 0.25 -- 3.00 cents lower. Cheese futures are 0.40 cent lower to 3.90 cents higher. The only decline is in the May 2027 contract. Nonfat dry milk futures are 0.57 -- 4.00 cents lower.