MILK:
Class III milk futures were mixed due to the divergence of cheese prices. It was positive to see barrels gain, possibly indicating a bottom is again being established. But the decline of blocks maintains a negative market tone. Milk futures are holding well through next year, remaining mostly unaffected by the decline of cheese prices over the past two days. There remains some optimism supply may tighten next year if the high cost of producing milk remains without milk prices increasing. Milk prices may struggle if problems persist in moving dairy products to other countries. There have been news reports of supply chain disruptions related to shipping delays of dairy products. There was an article in the New York Time on Monday reporting on some of the issues at shipping ports. The article indicates one of the largest cooperatives in the country, California Dairies Inc, generally ships 50 million pounds of milk powder and butter out of ports each month, mostly to Mexico and Southeast Asia. But, recently about 60% of the company's orders have been canceled or deferred to later months. This amounts to about $45 million in lost revenue per month for the company. The National Milk Producer Federation estimates the dairy industry has lost about $1 billion in revenue during the first half of this year and it looks like it may become worse. So far, dairy exports have been higher than last year, but that may begin to slow with the possibility product could back up into the market and result in lower prices.
AVERAGE CLASS III PRICES:
| 3 Month: | $17.87 |
| 6 Month: | $18.26 |
| 9 Month: | $18.43 |
| 12 Month: | $18.50 |
CHEESE:
Block cheese price may see further downside as there were five uncovered offers remaining at the close of the trading period. Lower prices did not generate any interest in buying. In fact, we may see a repeat of last time the market declined with price falling back down to the lows before buyers may again be interested. Strong holiday purchasing may be finished for the most part.
BUTTER:
Butter has not seen the price swings cheese has, but neither has it been able to push up to and above $2.00. The prospect for that may be dimming as quite a bit of buying for the holidays has been finished. Orders will still be placed, requiring buyers to step into the market, but they may not need to be as aggressive.
OUTSIDE MARKETS SUMMARY:
December corn slipped 0.75 cent, closing at $5.7650. January soybeans jumped 13 cents, closing at $12.5725 with December soybean meal up $9.60, closing at $371.70 per ton. December wheat gained 9.25 cents, closing at $8.2625. December live cattle slipped $0.35, closing at $131.77. December crude oil closed $0.09 higher at $80.88 per barrel. The DOW slipped 13 points, closing at 36.087 while the NASDAQ slipped 7 points, closing at 15,854.
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