OPENING CALLS:
| Class III Milk Futures: | 2 to 5 Higher |
| Class IV Milk Futures: | 5 to 10 Higher |
| Butter Futures: | 1 to 2 Higher |
OUTSIDE MARKET OPENING CALLS:
| Corn Futures: | 2 to 4 Lower |
| Soybean Futures: | 1 to 3 Higher |
| Soybean Meal Futures: | Mixed |
| Wheat Futures: | 3 to 5 Lower |
MILK:
Milk futures have shown some nice strength over the past two days. If the pattern holds of the past few months, the market might run out of steam soon. Fundamentals have not changed to the point that milk supply or dairy product supplies are tightening. Buyers may be more apt to purchase more aggressively at these lower prices as more interest surfaces to forward contract supplies rather than continue to hold back waiting for the possibility of lower prices. February and March Class III contracts remain below $18.00 and may have a difficult time seeing much more than choppy trade. Half of February is priced with the window of price fluctuation narrowing each day. However, it can still show significant volatility over the next two weeks.
CHEESE:
The block/barrel spread has narrowed to 27.50 cents, but this still remains extremely wide. Barrel supplies are more abundant than blocks with neither category showing any tightness of supply. Cheese output is strong, meeting demand and putting some in inventory. Manufacturing plants do not want to hold onto supply with concern over inventory building too rapidly. Higher prices will increase their desire to sell.
BUTTER:
The upside price potential for butter may be limited as cream supply is somewhat heavy, keeping churning active. Some plants are running seven days a week in order to utilize cream supply and rebuild inventory for later this year when butter production is not quite as strong. Demand remains variable but not with the concern over supply that dominated the market last year. The December Dairy Products report Friday will provide the level of production seen during the month compared to the previous month and previous year.
