MILK
There was an overall bearishness in Class III futures today. The decline of barrels offset the increase in dry whey and kept the daily calculation about unchanged, yet traders were more aggressive in selling futures contracts through the end of the year. It was a day that they decided to eliminate some of the premium later contacts currently held.
On the other hand, Class IV futures were steady to higher. Higher prices were generally confined to the second half of the year. Closer months should have been supported due to the increase in nonfat dry milk, but that is the market and it does not make sense some days.
USDA will release the December Milk production report on Wednesday. I estimate milk production to be down 0.4% from a year ago with cow numbers down 3,000 head from November. If cow numbers are down significantly more, lower milk prices might have had a greater impact and eventually tighten milk supply. However, the impact of a tighter milk supply may not be felt until later in the year when demand generally increases.
AVERAGE CLASS III PRICES
| 3 Month: | $15.62 |
| 6 Month: | $16.42 |
| 9 Month: | $16.98 |
| 12 Month: | $17.28 |
CHEESE
Block price's ability to hold the gains of yesterday was positive but not enough to trigger more aggressive buying from traders. The minor decline in barrels should not have put pressure on futures as it did but selling spilled over into later contracts, eliminating more of the premium that the market had been carrying.
USDA will release the December Cold Storage report Wednesday, which is not expected to show a growth in cheese inventory. Cheese stocks should finish the year similar to where they had been a year ago.
BUTTER
It appears the butter price is not going anywhere anytime soon. Buyers and sellers seem to be comfortable at the current level and take care of business when needed without much fanfare. Manufacturers want to keep inventory from building too much and will keep moving supply to the market. This will limit upside potential.
The December Cold Storage report is expected to show butter stocks closing the year higher than the previous year.
OUTSIDE MARKETS SUMMARY
March corn closed up 0.75 cent per bushel at $4.4650, March soybeans closed up 15.25 cents at $12.3950 and March soybean meal closed up $5.30 per ton at $361.10. March Chicago wheat closed steady at $5.9650 and April live cattle closed up $0.93 at $177.83. March crude oil is down $0.39 per barrel at $74.37. The Dow Jones Industrial Average is down 96 points at 37,905 with the NASDAQ is up 66 points at 15,426.
