MILK
Milk futures did not do much Tuesday, even though block cheese, butter and nonfat dry milk prices increased. The focus last week was on the weakness of blocks but that was not the focus today. Otherwise, Class III futures would have increased more than they had.
The market is in a unique position as milk production is below a year ago and replacement availability is tightening. However, current milk supply is sufficient for demand. USDA will release the January milk production report on Wednesday and it will show the level of milk production compared to a year ago.
I estimate milk production to be 0.4% below a year ago. The number of cows will be difficult to predict. Farms have gone out of business but many cows have been moved to other farms rather than to slaughter. Cow numbers may not have declined as much as some would anticipate. I estimate cow numbers to be down 2,000 head from the previous month.
AVERAGE CLASS III PRICES
| 3 Month: | $16.77 |
| 6 Month: | $17.38 |
| 9 Month: | $17.79 |
| 12 Month: | $17.90 |
CHEESE
The longer cheese prices continue to chop around, the less traders will react to price movements. Last week, blocks fell 9 cents with traders selling futures as the focus was on price weakness. The increase in blocks today garnered limited gains confined to the first half of the year. Later Class III contracts closed lower as traders were not convinced there would be much upside price potential as the year progressed.
Demand is slower for some varieties of cheese as the first half of the year generally sees inventory increasing due to reduced demand.
BUTTER
Price has been steady to higher the past six days with price nearing the recent high of Jan. 30. The attitude in the market seems to favor the price to move through that level and continue to trend higher. Demand is good and is expected to improve leading up to Easter. Manufacturers seem to be willing to hold inventory for later demand as it seems the price will not see much downside.
OUTSIDE MARKETS SUMMARY
March corn closed up 2.25 cents per bushel at $4.1875, March soybeans closed up 6.75 cents at $11.7900 and March soybean meal closed up $2.00 per ton at $347.60. March Chicago wheat closed up 22.25 cents at $5.8275. April live cattle closed down $0.23 at $187.33. April crude oil is down $1.29 per barrel at $77.17. The Dow Jones Industrial Average is down 64 points at 38,564 with the NASDAQ down 145 points at 15,631.
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