MILK:
Milk futures pushed higher Tuesday, fueled by increasing cash and the determination by the USMCA panel over Canada's misuse of its dairy-rate quotas. This triggered short-covering and aggressive new buying interest as it could mean more export potential for dairy products to Canada. A USMCA panel agreed with the United States that Canada is breaching its USMCA commitments by holding most of the in-quota quantity in its dairy tariff-rate quotas for use by Canadian processors. This reduced the amount of dairy products that could be shipped into Canada under the USMCA agreement. This decision will help eliminate unjustified trade restrictions on U.S dairy products and will ensure the U.S. dairy industry receives the full benefit of the USMCA agreement. Canada is the third largest export country for U.S. dairy products.
The Global Dairy Trade auction was held Tuesday with the trade weighted average increasing 0.3%. Anhydrous milk fat decreased 0.7% to $6,668 per metric ton (mt) or $3.02 per pound. Butter increased 0.3% to $5,868 or $2.66 per pound. Buttermilk powder increased 1.0% to $3,654 mt or $1.66 per pound. Cheddar cheese increased 4.9% to $5,487 mt or $2.49 per pound. Skim milk powder increased 1.0% to $3,773 mt or $1.71 per pound. Whole milk powder was unchanged at $3,866 per mt or $1.75 per pound. Lactose was not offered at this event. USDA will release the December Federal Order prices Wednesday. The trade is anticipating a Class III price of $18.42 and Class IV price of $19.87.
AVERAGE CLASS III PRICES:
| 3 Month: | $21.33 |
| 6 Month: | $21.10 |
| 9 Month: | $20.86 |
| 12 Month: | $20.64 |
CHEESE:
Buyers of cheese became more aggressive, likely believing export business might increase due to the determination by the USMCA panel over Canada's tariff-rate quotas. Canada has until early in February to comply with the panel's findings which could result in opening more of the market for U.S. dairy products. Buyers might now be preparing for a potential increase in demand. Sometimes the anticipation is more than the reality. Block cheese price is now back to the highest level since Nov. 12, 2020.
BUTTER:
Price is within 9 cents of the high established Aug. 12, 2017. If price were to move above that level, it would move back to levels last seen in December 2015. The current buying interest in the market would suggest price could go to that level. We know it will not continue to climb indefinitely, but there certainly is strong support under the market at the present time.
OUTSIDE MARKETS SUMMARY:
March corn jumped 20.25 cents, closing at $6.0950. January soybeans gained 34.75, closing at $13.7875 with January soybean meal up $3.70 per ton, closing at $427.60. March wheat gained 12 cents, closing at $7.70. February live cattle declined $1.10, ending at $137.82. February crude oil closed at $76.99 per barrel, up $0.91 on the day. The DOW gained 215 points, closing at 36,800 while the NASDAQ fell 210 points, ending at 15,623 points.
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