MILK
Class III milk futures posted strong gains with buying triggered by the strength of underlying cheese prices. Futures in nearby contracts did not hold their highs but closed very positive. There has not been a change in fundamentals that would suggest a tightening supply of cheese, but strong cash triggered short covering as traders exited the market. The price bounce was welcomed but may be short lived. It is unlikely the big push in the market was due to the heavy rains California has been having and the impact it is having on some dairies. As with any other weather event, the expectation many times is greater than the reality. Overall, the rain will be beneficial but will create some difficulties in the near term. Class IV futures could not find any aggressive buyer interest with contracts closing steady to lower. The gain of spot butter price was offset by the decline of nonfat dry milk. Each one-cent move in nonfat dry milk price equates to a 9-cent move in Class IV futures. Each one-cent move of butter price equates to a 4-cent move of Class IV price.
AVERAGE CLASS III PRICES
| 3 Month: | $19.19 |
| 6 Month: | $19.15 |
| 9 Month: | $19.32 |
| 12 Month: | $19.44 |
CHEESE
Strong gains of cheese prices today were unexpected. The aggressiveness of the buyer of blocks suggests there were orders that needed to be filled at whatever the cost. Bids were increased rapidly and without hesitation. Now price may be at a level at which there may be little desire to purchase supply for rebuilding inventory.
BUTTER
BWith retail demand slowing slightly and world prices slipping, there is little reason for a sustained upward price trend. Increased churning activity will slowly increase supply with inventory possibly near year-earlier levels. The fear of a shortage dissipated last year as supply remained sufficient for demand.
OUTSIDE MARKETS SUMMARY
March corn declined 1.25 cents closing at $6.5275. January soybeans gained 2 cents closing at $15.0350 with January soybean meal down $6.40 per ton closing at $496.70. March wheat declined 2 cents closing at $7.4150. February live cattle gained $0.97 closing at $157.75. February crude oil gained $0.86 ending at $74.63 per barrel. The Dow declined 113 points ending at 33,518 while the Nasdaq gained 66 points closing at 10,636.
