MILK
Nearby Class III milk futures took a hit, closing substantially lower in response to the weakness of barrels. However, after the markets were settled for the day, the milk production report was released. Traders reacted to the bullish implications of the report, pushing futures contracts substantially higher. Near the close of trading at 4 p.m. Central Time, the June Class III contract was 51 cents higher. This is quite a change from the settlement of 4 cents lower. Traders reacted to the report, pushing futures for May and later to double-digit gains. It will be interesting to see how much new buying interest and short-covering will push futures based on the report. It will also be interesting to see if buyers of cheese will step up and be more aggressive as they look out ahead. January milk production in the top 24 states declined 1.4% for January 2021 production per cow totaled 2.053, down 14 pounds for a year ago. Cow numbers declined 5,000 head. U.S. milk production declined 1.6% from a year earlier. This is the largest decline since October 209 when production declined 1.3%. Production per cow was down 15 pounds, totaling 2,034 pounds. Cow numbers declined 5,000 head from December with the nation's dairy herd totaling 9,368 head, down 82,000 head from a year ago. In 2009, milk production fell due to low milk prices. Now production is declining due to high input costs.
AVERAGE CLASS III PRICES
| 3 Month: | $21.80 |
| 6 Month: | $21.91 |
| 9 Month: | $21.82 |
| 12 Month: | $21.51 |
CHEESE
It will be interesting whether the bullish implications of the milk production report will result in aggressive buying Thursday in spot cheese. Buyers have already been purchasing ahead for the second quarter. They may increase those purchases or maybe even look ahead further than that. This may push block cheese price above $2 if buyers become more concerned over the contraction of milk production. The decline of American cheese inventory in January as well as the contraction of milk production could turn the trend higher again.
BUTTER
Butter may follow a similar direction but maybe not to the extent as cheese. However, churning schedules have increased, which is allowing demand to be met as well as build some inventory. Buyers may turn more aggressive as well due to fear of tightening supply.
OUTSIDE MARKETS SUMMARY
March corn gained 9 cents, closing at $6.8375. March soybeans jumped 40 cents, closing at $16.75 with March soybean meal up $17.40 per ton, closing at $471.10. March wheat jumped 31.75 cents, closing at $8.76. February live cattle declined $0.70, ending at $143.05. March crude oil gained $0.19, closing at $92.10 per barrel. The Dow fell 465 points, closing at 33,132, while the NASDAQ fell 344 points, closing at 13,037.
