MILK
Milk production is slowly improving in many areas of the country. Fall weather is improving cow comfort and appetites. Components are better than usual for this time of year improving cheese output. Class III futures showed some strength today even though blocks remained steady. The past week saw significant pressure on Class III futures even though underlying cheese prices were stronger. Traders were steeped in bearishness, but another day of strength in barrels triggered short covering and higher prices. The base Class I price for November was announced at $24.09. This was an increase of $1.38 from the October price. Milk buyers might be a bit more aggressive with their milk purchases next week to increase supply prior to the Class I price increase on November 1st. USDA will release the September Milk production report tomorrow. I estimate milk production to be 1.2% above a year ago with cow numbers 2000 head more than the previous month.
AVERAGE CLASS III PRICES
| 3 Month: | $21.02 |
| 6 Month: | $20.42 |
| 9 Month: | $20.27 |
| 12 Month: | $20.21 |
CHEESE
Barrel cheese continues to outpace blocks with the spread widening further each day this week. Current supply of barrels is tighter than blocks keeping buyers more aggressive. Cheese production in the Midwest is strong with many plants indicating strong demand for product. This is supplying the market in general with cheese leaving little reason or need for buyers to come to the daily spot market to find supply. This leaves the market range bound searching for direction.
BUTTER
Inventory level has not been able to gain on a year ago which leaves supply tighter than many would like. There is no concern about a shortage as there is sufficient butter being produced along with what is in storage. However, potentially closing the year with inventory substantially below a year ago is cause for concern as it could set the stage for strong prices again next year. Ongoing demand will need to remain strong, or price could see a substantial retracement.
OUTSIDE MARKETS SUMMARY
December corn declined 2.75 cents closing at $6.7825. November soybeans gained 0.50 cents ending at $13.7250 with December soybean meal down $0.10 per ton closing at $$401.70. December wheat declined 8.25 cents closing at $8.4125. October live cattle gained $0.87 closing at a new contract high of $149.35. November crude oil gained $2.73 per barrel ending at $85.55. The DOW declined 100 points closing at 30,424 while the NASDAQ declined 92 points closing at 10,681.
