MILK
The price spread between Class III and Class IV futures continues to widen. The September contract is nearing the point where futures will begin to flatline due to the trade having much of the prices estimated for the Federal Orders. Currently, there is about a $4.50 price spread between the two with Class IV higher. The price difference between these two classes of milk is amazing. However, the difference between cheese and butter is substantial and unusual. It looks like the spread could widen if current market forces remain. Milk production is sufficient for demand leaving no reason for manufacturers to fear a shortage. Milk production might be at or near the low point for the year and may begin to increase in the next few weeks as the summer and hot weather moves behind us. The potential of the rebound of production is unclear. One would think it may be slow to develop with full production potential not seen until cows move into their next lactation. However, it has been surprising just how production per cow has been able to increase compared to last year even through the hot weather. Producers are trying to do the best they can with lower cow numbers.
AVERAGE CLASS III PRICES
| 3 Month: | $20.15 |
| 6 Month: | $20.46 |
| 9 Month: | $20.45 |
| 12 Month: | $20.40 |
CHEESE
It appears cheese prices may be stuck in a range. Buyers and sellers will do business as they need to without the need to chase the market higher or push the market lower. We know this will not last forever, but current supply and demand may leave the market in the current mode for some time to come. Increased holiday buying may not be enough to push prices higher. It may see a reduction in supply to trigger a rally and that does not seem likely with current supply.
BUTTER
Price is knocking on the door of a record high. The previous high was $3.1350 in September 2015. Price is now 1.50 cents away from matching that level. Buyers continue to purchase supply at these prices with little concern they are paying too much. They see limited downside risk but the potential for further upside risk. Buyers would rather be safe than sorry and continue to increase ownership.
OUTSIDE MARKETS SUMMARY
September corn gained 11.75 cents closing at $6.8075. September soybeans fell 20.50 cents closing at $14.90 with September soybean meal down $10.60 closing at $433.50 per ton. September wheat gained 7 cents ending at $8.00. October live cattle gained $0.50 closing at $145.05. October crude oil gained $0.01 closing at $86.88 per barre. The DOW declined 173 points closing at 31,145 while the NASDAQ declined 86 points closing at 11,545.
