MILK
Traders are bullish on the market as some contracts continued to push higher despite little movement of the underlying cash prices. Reduced milk production has become a greater focus now that demand for school milk is high and cheese production is slowing. There is sufficient milk available for needs but the supply is not overabundant and spot milk prices are increasing. The level of demand will be the key to the upside price potential. Greater buying interest has developed, which may provide continued support to the market.
The Global Dairy Trade Auction showed the trade-weighted average up 5.5% from the previous event. There were 34,916 metric tons sold during the trading period. Anhydrous milk fat increased 4.8% to $7,244 per metric ton or $3.29 per pound. Butter increased 3.7% to $6,706 per metric ton or $3.04 per pound. Cheddar cheese slipped 0.2% to $4,274 per metric ton or $1.94 per pound. Lactose increased 2.7% to $945 per metric ton or $0.43 per pound. Mozzarella cheese increased 5.0% to $4,810 per metric ton or $2.18 per pound. Skim milk powder increased 4.0% to $2,636 per metric ton or $1.20 per pound. Whole milk powder increased 7.2% from the previous event to $3,482 per metric ton or $1.58 per pound. USDA will release the July Milk Production report on Wednesday. Milk production is expected to be below the level of last year. I estimate milk production to be down 1.1% below a year ago.
AVERAGE CLASS III PRICES
| 3 Month: | $21.90 |
| 6 Month: | $21.13 |
| 9 Month: | $20.26 |
| 12 Month: | $19.82 |
CHEESE
The block/barrel spread is at an inverted 16.50 cents. Much of the time over the past few years, barrels have been above blocks. Barrels are in a tighter supply position keeping buyers more aggressive. Cheese has strong support and prices should remain higher in the near term. The continued price strength may increase buying interest and push prices higher as buyers become concerned over higher prices. Traders begin to leapfrog over each other to purchase supplies.
BUTTER
It was a little surprising the price slipped today as buyers were expected to remain aggressive. Of course, the price will not increase consistently without price corrections. The butter supply is not tight keeping buyers from getting too aggressive. Inventory remains above a year ago.
OUTSIDE MARKETS SUMMARY
December corn closed down 2.25 cents per bushel at $3.9800, November soybeans closed steady at $9.7600 and December soybean meal closed down $2.20 per ton at $308.30. September Chicago wheat closed up 4.75 cents at $5.3300. October live cattle closed down $3.43 at $175.60. October crude oil is down $0.56 per barrel at $73.10. The Dow Jones Industrial Average is down 62 points at 40,835 with the NASDAQ down 60 points at 17,817.
