MILK
Class III milk futures were able to find some strength from a higher block cheese and butter price. The increase of blocks outweighed the decrease of barrels. This caused futures to move higher due to futures not responding to higher prices during the second half of last week. The market had to adjust today to keep somewhat in line. Class III futures only show a price fluctuation of 57 cents out through the end of next year. Traders are not putting much premium in futures over the 15 months. It is unlikely the price fluctuations will be limited to only that amount, but it is a sobering thought. Milk prices at the current level most likely will not reduce milk production even though feed prices are higher. Some farms that go out of business will be absorbed by other farms, leaving production fairly consistent. It will be up to demand to increase prices. There are some indications demand is improving, which may tighten supply and increase prices.
AVERAGE CLASS III PRICES
| 3 Month: | $17.15 |
| 6 Month: | $17.30 |
| 9 Month: | $17.39 |
| 12 Month: | $17.47 |
CHEESE
The spread between blocks and barrels has tried to move closer together a few times, but that is only for a brief period of time before widening back out again. Barrels are in a more plentiful supply position. It may be some time before that changes. Blocks moved above the previous high set back on Aug. 13. It looks like blocks could break out of the sideways trading range it has been in for quite some time. Further upside price movement might get traders to think otherwise about being bearish on the market.
BUTTER
Dairy Market News reported that cream supply is tightening and that there was less available during the holiday weekend than usual. If this trend continues, it will eventually reduce supply and possibly result in higher prices if demand remains strong. Trucking continues to be a nagging problem moving cream and moving product. However, it is getting to where it needs to be, but with some delays at times.
OUTSIDE MARKETS SUMMARY
December corn declined 4.25 cents. November soybeans declined 1.75 cents, ending at $12.8475, with October soybean meal up $2, closing at $341.50 per ton. December wheat declined 1.50, closing at $6.87. October live cattle fell $1.15, closing at $122.27. October crude oil gained $0.73, closing at $70.45 per barrel. The Dow gained 262 points, closing at 34,870, while the NASDAQ slipped 10 points, closing at 15,106.
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