MILK:
Both milk production per cow and components have been higher than last year. Better components increase cheese yield. However, there are more reports of milk supply becoming tighter in some regions. This is being reflected in the increase in spot milk prices. With the impact of hurricane Ian in the southeast, the movement of milk might be slowed. However, that will return to normal in a few weeks again. Traders are not moving milk futures in the anticipation of where prices will go but rather are keeping prices more in line with underlying cash. This indicates an uncertainty over the level of demand moving through the end of the year. Traders would rather be cautious rather than anticipate price strength as outside markets are having an impact on trader psychology. USDA will release the Quarterly Grain Stocks report tomorrow which may have some impact on milk futures but likely will not have an impact on spot trading. The August Agricultural Prices report will also be released providing the average prices used for income over feed for the Dairy Margin Coverage program. I do not expect a payment to be rendered for the month.
AVERAGE CLASS III PRICES:
| 3 Month: | $20.87 |
| 6 Month: | $20.62 |
| 9 Month: | $20.49 |
| 12 Month: | $20.46 |
CHEESE:
There are some reports of good demand which has tightened the supply of cheese at the manufacturing level. There are also reports of retail cheese demand slowing as high food prices have caused some consumers to reduce some of their purchases. Some of this difference may be variety specific. Pizza cheese demand has been strong. International demand has been strong but that may decrease over time due to the strong U.S. Dollar. The block/barrel spread moved to an inverted 27.75 cents. This is not the widest it has ever been, but it is extremely wide indicating more availability of blocks versus barrels.
BUTTER:
In general, butter plants are busy producing butter to fill orders and the attempt to keep inventory on hand. Even with the current high price, demand remains good both domestically and internationally. Some plants have decided to sell a portion of their cream rather than churn it. One reason may be due to the difficulty of finding employees. It may be difficult for price to set a new high as consumers face high grocery bills. This could slow demand to some extent.
OUTSIDE MARKETS SUMMARY:
December corn declined a penny to $6.6950. November soybeans gained 2 cents closing at $14.1075 with October soybean meal down $12.70 closing at $409.10 per ton. December wheat declined 7 cents closing at $8.9625. October live cattle jumped $1.07 ending at $14412. November crude oil declined $0.92 closing at $81.23 per barrel. The DOW fell 458 points ending at 29,226 while the NASDAQ dropped 314 points ending at 10,738.
