MILK
Class III milk futures set back Monday as prices were overdone to the upside last week as well as the potential bearish implications of the cold storage report. Obviously, the strength or weakness of the market will be determined by supply and demand throughout the rest of the year. Demand so far has been good but not good enough due to the increase of cheese in storage for both August and September. Milk production has been declining, as seen on the milk production reports. However, an improvement of the milk price outlook may slowly change that again. The factor that may make this a longer process is high feed prices as well as the costs of goods and services. The cost of production has risen, increasing the financial pressure on farms. Tariffs on New Zealand dairy, the country's largest export commodity, will be phased out to the UK over the next five years. This may not be a good deal for farmers in the UK, as New Zealand's lower cost of production could make it attractive for more product to move into the UK. It does increase export opportunities for the UK, but that might be offset by potential increased imports.
AVERAGE CLASS III PRICES
| 3 Month: | $18.79 |
| 6 Month: | $18.60 |
| 9 Month: | $18.51 |
| 12 Month: | $18.49 |
CHEESE
Cheese prices diverged a bit Monday, having limited impact on milk futures. The greater impact was from the numbers released on the cold storage report. It is uncertain if buyers may pull back from current levels, seeing sufficient cheese supplies available to the market, or whether they will remain interested in purchasing to ensure they have sufficient supplies on hand anyway. The question is whether slowing production will eventually tighten supply. However, that may not be answered until next year.
BUTTER
Butter price has again made a nice move higher and back to the highest level it has been since May 21. The high of $1.9050 may be achieved, but it may be difficult to reach $2 before the end of the year. However, higher cream prices are leaving some manufacturers only using regular supplies of cream rather than reaching out for additional supplies from the spot market.
OUTSIDE MARKETS SUMMARY
December corn closed unchanged at $5.38. November soybeans jumped 16.75 cents, ending at $12.3725, with December soybean meal down $0.20 at $331.70 per ton. December wheat gained 3.50 cents, closing at $7.5950. October live cattle gained $0.92, closing at $122.02. November crude oil ended unchanged at $83.76 per barrel. The Dow gained 64 points, ending at 35,741, while the NASDAQ gained 137 points, ending at 15,227
