Tuesday Closing Dairy Market Update - Correction: December Income Over Feed Was $9.42

GENERAL OVERVIEW:

Milk futures were higher in most contracts as spot cheese and nonfat dry milk prices increased. The front-month February Class III contract struggled and could not move into positive territory despite the increase in cheese prices. The December income over feed price was $9.42.

MILK:

I made an error on Monday in reporting the December income over feed price. The correct price was $9.42. This results in a DMC payment of $0.08 per cwt and the only payment under the program in 2025. This is the first payment under the DMC program since February 2024. The uncertainty of the market has traders running from one side of the ship to the other in an attempt to outguess the market and make a short-term profit. Most of the weakness on Monday was regained today. It was surprising to see the strength in Class III contracts due to the decline in the dry whey price. Today was the final trading day for the January contract, with the January Federal Order prices to be announced on Wednesday. Traders anticipate the Class III price to be $14.59 and the Class IV price to be $13.57.

AVERAGE CLASS III PRICES:

3 Month:	$16.25
6 Month:	$16.90
9 Month:	$17.23
12 Month:	$17.27

CHEESE:

Cheese prices give the impression they will remain in a sideways range for the time being. Prices will remain choppy, but it appears the market may have found a bottom. It is difficult to say when prices will develop an uptrend. There remains a risk of lower prices if milk production continues to grow and demand does not.

BUTTER:

Butter seems to be in a better position than cheese, with greater potential for further strength. The Grade A nonfat dry milk price closed at the highest price since Oct. 13, 2022. Demand has improved substantially, with buyers aggressively purchasing available supply. The strength of nonfat is providing substantial support to Class IV futures.

OUTSIDE MARKETS SUMMARY:

March corn closed up 2.75 cents per bushel at $4.2850, March soybeans closed up 5.50 cents at $10.6575 and March soybean meal closed down $2.60 per ton at $291.90. March Chicago wheat closed up 1.00 cent at $5.2875. April live cattle closed up $2.10 at $241.63. March crude oil is up $1.71 per barrel at $63.85. The Dow Jones Industrial Average is down 167 points at 49,241, with the NASDAQ is down 337 points at 23,255.

Tuesday Midday Dairy Market Summary - Nonfat Dry Milk Pushes Higher

OUTSIDE MARKETS SUMMARY:

CORN:	2 Higher
SOYBEANS:	5 Higher
SOYBEAN MEAL:	$2.40 Lower
LIVE CATTLE:	$1.80 Higher
DOW JONES:	442 Points Lower
NASDAQ:	501 Points Lower
CRUDE OIL:	$1.15 Higher

MIDDAY MARKET UPDATE:

The block cheese price increased 2.00 cents, closing at $1.4050 with 11 loads traded. There were four unfilled bids and no uncovered offers remaining at the close. The barrel cheese price increased 2.00 cents, closing at $1.4150 with no loads traded. The dry whey price decreased 3.50 cents, closing at 70.50 with no loads traded. Class III futures are 2 cents lower to 49 cents higher. The butter price remained unchanged at $1.58 with nine loads traded. There were 27 unfilled bids and one uncovered offer remaining at the close of spot trading. Grade A nonfat dry milk jumped 4.00 cents to close at $1.50 with four loads traded. This is the highest price since Oct. 13, 2022. Class IV futures are steady to 12.00 cents higher. Butter futures are 1.97 cents lower to 2.00 cents higher. Dry whey futures are 1.10 cents lower to 0.32 cent higher. Cheese futures are 0.90-4.60 cents higher. I need to correct my closing commentary on Monday. I incorrectly reported that the income over feed price for December was $9.58 when in fact it was $9.42. There will be a payment of $0.08 per cwt for the month. I apologize for reporting the incorrect price.

Tuesday Morning Dairy Market Update - Milk Futures May Correct From Monday's Weakness

OPENING CALLS:

Class III Milk Futures:	8 to 15 Higher
Class IV Milk Futures:	5 to 8 Higher
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	1 to 2 Higher
Soybean Futures:	6 to 8 Higher
Soybean Meal Futures:	$1 to $2 Lower
Wheat Futures:	1 to 2 Higher

MILK:

Greater volatility is being seen in milk futures, but it has not accomplished much as far as price direction is concerned. There had been a substantial increase in prices over a week ago, but that has since settled down to the levels the futures were before the volatility. Strong milk production does not support strong milk prices. Replacement heifer supplies continue to tighten as shown on the Cattle Inventory report, but it has not impacted the increase in cow numbers. Milk production remains strong and so does the production of dairy products. Milk futures were overdone to the downside on Monday and are now correcting to move in line with the spot market until spot trading shows further direction.

CHEESE:

It is uncertain whether cheese has found a higher level of support or if this is just temporary. Higher prices may be difficult to support unless there is increasing demand. Strong milk production keeps sufficient milk available for cheese production. Buyers show little concern over a tightening market.

BUTTER:

The demand for butter has been stronger than had been anticipated. Retail and export demand has been strong. However, demand from food service remains less than desired and expected. The current price level should be supported, but the upside potential may be limited over the next few months.