Monday Closing Dairy Market Update - Class III And Class IV Milk Futures Diverge

MILK:

It was not expected to be a high-volume trading day with limited price volatility. However, the opposite was true due to the strength in underlying cheese prices and the slight weakness of butter and nonfat dry milk. Class III futures showed moderate trading activity after spot cheese prices increased and traders began buying more aggressively. December futures and options will end on Tuesday with the December Federal Order prices to be announced on Thursday. Traders anticipate a December Class III price of $18.71 and a Class IV price of $20.75. The January Class III contract will take over as the lead month with a price of about $1.80 higher. The January Class IV price will be about 30 cents higher than where the December contract will end. Both contracts are significantly better than they were a month ago. The USDA will release the November Agricultural Prices report on Wednesday. This provides most of the prices used in calculating income over feed for the Dairy Margin Coverage program. The FSA may not release the soybean meal price until Thursday.

AVERAGE CLASS III PRICES:

3 Month:	$19.99
6 Month:	$19.93
9 Month:	$19.66
12 Month:	$19.48

CHEESE:

Cheese buyers were aggressive with a desire to increase ownership before the end of the year. The increase in prices may bring more buyers into the market as they will be willing to purchase ahead of further price increases. Fundamentally, the market is not bullish, but prices are building support. More milk has been available for manufacturing due to schools being closed. Lower spot milk prices show that there are plentiful milk supplies.

BUTTER:

Class IV futures were mostly lower due to the weakness of cheese and nonfat dry milk. Trading activity was light and not representative of a true correlation with the underlying cash. Butter inventory declined substantially in November. Recent reports have indicated that inventory is beginning to build due to heavy cream supplies and steady to slowing demand.

OUTSIDE MARKETS SUMMARY:

March corn closed down 1.75 cents per bushel at $4.5225, March soybeans closed up 2.00 cents at $9.9175 and March soybean meal closed up $1.30 per ton at $311.80. March Chicago wheat closed up 1.75 cents at $5.4825. February live cattle closed down $0.35 at $190.30. February crude oil is up $0.53 per barrel at $71.13. The Dow Jones Industrial Average is down 418 points at 42,574 with the NASDAQ down 235 points at 19,487.