MILK
Class III milk futures held their own as barrel weakness was offset by the strength of dry whey. Class IV futures did not see strength as would have been anticipated by the increase in butter price with contracts closing mixed. With steady milk production, it is difficult to see much upside in spot cheese prices as production remains sufficient for demand.
Cow numbers did not decrease in August from the previous months despite strong cull cow prices. It will be up to demand to tighten supply enough to move prices higher. The inability of milk prices to move higher at this time of year is cause for concern as now is when demand for underlying cash products is typically high as buyers look ahead to holiday demand. There is a potential that cheese buyers will turn more aggressive at the current lower prices supporting the market through October.
AVERAGE CLASS III PRICES
| 3 Month: | $17.70 |
| 6 Month: | $17.85 |
| 9 Month: | $18.01 |
| 12 Month: | $18.13 |
CHEESE
The August Cold Storage report showed a surprising increase in American cheese inventory. Stocks totaled 849.4 million pounds, a gain of 7.5 million pounds from July. It is not unheard of but is unusual for stocks to increase at this time of year.
Swiss cheese inventory totaled 22.4 million pounds, down 420,000 pounds from July, but was 6% above a year ago. Other cheese inventory declined 10.6 million pounds, totaling 617.7 million pounds, unchanged from a year ago. Total cheese inventory decreased by 3.5 million pounds to 1.489 billion pounds, up 1% from a year ago. This would explain why cheese prices have been unable to move higher.
BUTTER
Butter inventory during August totaled 289.1 million pounds. This was a decrease of 40.6 million pounds or 12% from July. This has not been a record decline for any month, but it certainly ranks up there with a few others. However, inventory remains 4% above a year ago. The large decline shows strong demand and is the reason butter price has increased to its current level.
OUTSIDE MARKETS SUMMARY
December corn closed up 4 cents per bushel at $4.8125, November soybeans closed up 1.50 cents at $12.9775 and December soybean meal closed up $4 per ton at $389.80. December Chicago wheat closed up 9.50 cents at $5.8900. December live cattle closed down $0.13 at $191.23. November crude oil is down $0.35 per barrel at $89.68. The Dow Jones Industrial Average is up 43 points at 34,007 with the NASDAQ up 60 points at 13,271.
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