MILK
Milk futures were higher with February through September Class III futures closing at $20 or higher. February Class III futures out through the end of the year closed at new contract highs. At least it seems as if milk prices are keeping up with escalating grain prices. If the income-over-feed price moves more favorable, farmers may want to add more cows again. However, that is not going to happen very quickly as other costs are increasing substantially as well. Feed inventory also needs to be taken into consideration. The initial impact might be slowing of culling and then waiting to see whether higher milk prices will remain for an extended period of time. The supply of replacement heifers is lower, possibly reducing the ability to increase cow numbers. There are milk plants that have told some of their patrons that have been discussing expansions but could not, due to the ability of the plant to process the milk, that they would be allowed to expand if they wanted to. This is a complete about-face from what has been taking place over the past years.
AVERAGE CLASS III PRICES
| 3 Month: | $19.51 |
| 6 Month: | $19.80 |
| 9 Month: | $19.88 |
| 12 Month: | $19.89 |
CHEESE
Cheese prices are holding and slowly improving, but not as much as Class III milk futures indicate. When a market turns more bullish, traders put more price premium into futures in the anticipation of higher prices yet to come. Block cheese price has yet to regain what it lost over a week ago. It is possible price could hit $2 before the year is finished if buyers remain concerned that milk supply would continue to tighten. There is sufficient cheese available for demand with inventory higher than last year. However, buyers are anxious and concerned, which is keeping them buying. Dry whey price has reached a level at which there was demand destruction that last time price was this high. This could begin to take place again.
BUTTER
Cream supply has become more available recently, which should allow plants to increase churning activity. Demand has been outpacing production, reducing inventory to a level quite a bit below a year ago. International demand has remained strong with exports this year 132.5% above a year ago. Buyers continue to purchase believing higher price is yet to come.
OUTSIDE MARKETS SUMMARY
March corn gained 9 cents, closing at $6.1475. January soybeans jumped 30.50 cents, closing at $13.6250, with January soybean meal up $8.70 per ton, closing at $414.80. March wheat declined 10.75 cents, ending at $8.04. December live cattle closed $0.25 higher at $137.30. February crude oil jumped $2.15, closing at $75.94 per barrel. The Dow gained 352 points, ending at 36,302, while the NASDAQ gained 218 points, closing at 15,871.
