Wednesday Morning Dairy Market Update - Traders Cautious Over Upside Potential

OPENING CALLS:

Class III Milk Futures:	5 to 15 Higher
Class IV Milk Futures:	Mixed
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	Mixed
Soybean Futures:	2 to 5 Higher
Soybean Meal Futures:	$1 to $3 Higher
Wheat Futures:	2 to 4 Higher

MILK:

Class III milk futures had an impressive rally Tuesday with increased strength developing after the markets were settled for the day. That set the stage for stronger prices overnight. Class IV futures showed no activity Tuesday and no activity overnight. More milk is available for manufacturing with spot milk prices continuing to remain $4.00 to $11.00 below class where it has been since the end of last year. This leaves plenty of milk available for processing. Milk production is not expected to slow down very much anytime soon other than the usual decrease in production due to summer weather. Lower milk prices still have not increased culling significantly, even though cull cow prices are very strong.

CHEESE:

There is sufficient cheese available for demand even though inventory has not been building higher than last year's level. The current supply/demand balance indicates more cheese than demand. It certainly is good that inventory has not been building. However, it has not been building due to sellers continuing to offer it to the spot market at reduced prices. They are not holding back, anticipating higher prices.

BUTTER:

Butter is in a similar situation as sellers continue to sell on the spot market. The difference is inventory is higher than a year ago. Churns have been active with cream supply readily available. Cream is tightening but continues to remain sufficient for demand. Buyers are not concerned about supply.