Milk:
USDA's announcement of a fifth round of the Farmers to Families Food Box program ignited a fire under the markets. Traders remember what took place last year as prices increased as a result of the Food Box program, eventually moving cheese prices to record highs. This has pushed traders into a frenzy, believing a similar price move could take place or at least significantly higher prices. How far this will push prices is anyone's guess. The purchase of an additional $1.5 billion worth of food for nationwide distribution for food programs should increase demand or at least maintain the demand of last year. The Global Dairy Trade Auction trade weighted average increased 3.9% on Tuesday's event. Anhydrous milk fat increased 5.5% to $4,604 per metric ton (mt) or $2.09 per pound. Butter increased 7.2% to $4,526 per pound or $2.05 per pound. Buttermilk powder gained 6.9% to $2,876 per mt or $1.30 per pound. Cheddar cheese increased 5.0% to $4,078 per mt or $1.85 per pound. Lactose gained 7.4% to $1.099 per mt or $0.50 per pound. Skim milk powder gained 4.1% to $3,044 per mt or $1.38 per pound. Whole milk powder gained 3.1% to $3,306 per mt or $1.50 per pound.
Average Class III Prices:
| 3 Month: | $17.36 |
| 6 Month: | $17.67 |
| 9 Month: | $17.71 |
| 12 Month: | $17.64 |
Cheese:
Cheese prices responded Tuesday, increasing as buyers were more aggressive. Prices moved higher but were kept in check by the willingness of sellers to continue to move product. It is unclear just how far cheese prices will move as buyers will be purchasing for rebuilding aging programs as they have been doing as well as purchases for the Food Box program. Solicitations to existing Basic Ordering Agreement holders are expected to be issued by the end of the week, with contract awards expected to be made by Jan. 19. Deliveries will begin shortly after awards are issued and continue through the end of April. Whether another Food Box program will follow is too early to tell.
Butter:
Butter will also be the recipient of increased demand. However, there is more supply available, which may limit upside price potential. Greater demand will be needed in order to keep inventory in check. Churns are very active utilizing available cream. Demand from the food service industry continues to suffer and will for the foreseeable future.
Outside Markets Summary:
March corn gained 8 cents, closing at $4.9175. January soybeans gained 33.50 cents, ending at $13.50 with January soybean meal up $8.20 per ton, closing at $435.40. March wheat jumped 12 cents, ending at $6.54. February live cattle jumped $2.75, closing at $115.05. February crude oil jumped $2.31 per barrel, closing at $49.93. The DOW increased 168 points, ending at 30,392 while the NASDAQ gained 121 points, closing at 12,819.
