OPENING CALLS:
| Class III Milk Futures: | Mixed |
| Class IV Milk Futures: | 4 to 8 Higher |
| Butter Futures: | 1 to 2 Higher |
OUTSIDE MARKET OPENING CALLS:
| Corn Futures: | 2 to 3 Lower |
| Soybean Futures: | 5 to 8 Lower |
| Soybean Meal Futures: | Mixed |
| Wheat Futures: | 4 to 6 Higher |
MILK:
Class III milk futures dropped quite a bit during the second half of last week due to weakness of cheese prices. It may be an interesting week if buyers continue to hold back and purchase on an as-needed basis. Trading on Monday may be slow to develop as traders may wait until spot trading before becoming very active. The other possible limitation to trading activity may be the anticipation of the December Milk Production report that will be released Monday afternoon. I estimate milk production to be down 0.6% from a year ago. The decline of cow numbers should slow with my estimate being 6,000 head less than the previous month. This report will be important for determining the direction of milk prices over a period of time. The difficulty to predict milk production will be due to the level of milk production revision to the November report. The October report had a significant revision, which changed milk production quite a bit. However, the revision had little negative impact on milk futures over the past month.
CHEESE:
Cheese futures anticipate higher prices as the year progresses. Futures generally carry a premium to underlying cash in anticipation of strength. Futures fell back quite a bit last week but still retain a premium. USDA will release the December Cold Storage report Monday. The report should show higher inventory of cheese at the end of the year compared to the previous year. This may not be bearish to the market but may temper some of the aggressive buying that had been taking place.
BUTTER:
Butter regained the losses of last week as buyers need to pick up product to fill orders and rebuild inventory. The Cold Storage report is expected to see inventory lower at the end of the year compared to a year earlier. Butter futures continue to hold a significant discount to cash, which is very unusual. Cash buyers should remain aggressive.
