MILK:
January Class III futures showed limited price movement due to it being mostly priced. The brunt of the weakness in cheese took place in February as it will move closely in line with underlying cash. February futures moved 89 cents from high to low during the course of Tuesday as traders initially were bullish on cheese prices, but then quickly changed when weakness continued. However, that had limited impact on later contracts as they closed higher. Contracts were quite a bit off the highs of the day but closed higher despite underlying weakness. The rebound of butter gave confidence to traders that the downside to cheese may be limited. The Global Dairy Trade auction took place Tuesday with an increase of 4.6% for the trade weighted average. Anhydrous milk fat increased 0.6% to $6,720 per metric ton (mt) or $3.05 per pound. Butter increased 5.0% to $6,158 per mt or $2.79 per pound. Cheddar cheese increased 1.1% to $5,546 per mt or $2.52 per pound. Skim milk powder increased 5.0% to $3,963 per met or $1.80 per pound. Whole milk powder increased 5.6% to $4,082 per mt or $1.85 per pound. Buttermilk powder was not offered at this event and there was no price for lactose.
AVERAGE CLASS III PRICES:
| 3 Month: | $21.44 |
| 6 Month: | $21.63 |
| 9 Month: | $21.52 |
| 12 Month: | $21.30 |
CHEESE:
Cheese prices were under pressure, but that did not deter the bullish attitude of traders in the market. The block/barrel spread widened further Tuesday with barrels now 7.50 cents above blocks. This inversion is providing some support under the market as the anticipation is that blocks will eventually move back above barrels again. There is a possibility barrels could fall to correct the inverted spread, but the attitude seems to be that blocks are destined to move higher.
BUTTER:
Price bounced after three consecutive days of weakness. It is uncertain whether buyers will remain aggressive and increase their desire to purchase or whether this was just business being done without too much fanfare. The GDT butter price is right in line with the U.S price, which makes it a bit more expensive to import U.S. butter. However, with tight world supplies, it may not make much difference as buyers will purchase what is available from wherever they can.
OUTSIDE MARKETS SUMMARY:
March corn gained 3.25 cents, closing at $5.9950. March soybeans declined 8.50 cents, closing at $13.6125 with March soybean meal down $15.50 per ton, closing at $390.10. March wheat jumped 27.50 cents, ending at $7.69. February live cattle declined $0.30, closing at $137.67. February crude oil gained $1.61, closing at $85.43 per barrel. The DOW fell 543 points, ending at 35,368 while the NASDAQ fell 387 points, closing at 14,507.
