MILK:
Cheese prices continued to decline Wednesday but had limited effect on Class III futures. To some extent the weakness had already been factored in. But there also remains a certain element of bullishness under the market as some traders still believe higher grain prices will have an impact on milk production over time. It has been interesting making a comparison of milk to corn. July corn futures topped on May 7 while July Class III milk futures topped on May 12. Corn price has declined 74 cents per bushel since the day it topped while milk has declined 88 cents per cwt. That is a really similar price movement that one normally does not see due to it being two different markets. This is an indication as to how traders are perceiving the milk market. Corn may have a much larger and quicker influence on milk futures this year, but the bottom line will be the level of milk production and demand for that milk. USDA announced the June Class I price at $18.29. This is an increase of $1.19 from May. The April Milk Production report will be released Thursday and is expected to see continued strong milk production. I estimate milk production up 2.0% from the previous year with cow numbers up 2,000 head from the previous month.
AVERAGE CLASS III PRICES:
| 3 Month: | $18.78 |
| 6 Month: | $19.03 |
| 9 Month: | $18.87 |
| 12 Month: | $18.63 |
CHEESE:
There are plentiful supplies of milk available for cheese production. Demand for cheese is strong, which may result in greater competition for spot milk loads as milk production slowly recedes from the peak of spring flush. With cheese output higher, there is more supply available, which has resulted in some pressure on prices as plants want to move product rather than build inventory. This has put pressure on cheese prices. The downside of prices may be limited from the current level, but the period of time prices may remain at lower levels is unclear.
BUTTER:
There is greater demand for cream from ice cream manufacturers. However, churns are receiving sufficient supply to keep production strong. Retail butter demand has slowed to some extent. That is not a concern and was expected due to the substantial increase of demand from the food service industry.
OUTSIDE MARKETS SUMMARY:
July corn closed unchanged at $6.63. July soybeans plummeted 36 cents, closing at $15.3825 with July soybean meal down $7.60 per ton, closing at $403.20. July wheat fell 18.75 cents, closing at $6.7925. June live cattle closed $0.15 higher at $116.90. June crude oil fell $2.13 per barrel, closing at $63.36. The DOW declined 165 points, ending at 33,896 while the NASDAQ slipped 4 points, closing at 13,300.
