MILK:
The February Class III contract moved above $21.00 for a brief period today but could not hold above that level. Surprisingly, milk futures moved higher due to the decline of block cheese. Traders seem to think the downside price risk is limited. Some bullish information has been noted and is providing support. The key to price strength will be demand as the first quarter unfolds. It is a time when demand is generally slower. Buyers could remain active looking ahead to protect against prices by purchasing cheese and butter and paying for storage earlier than usual. Overall dairy exports in November declined 9% due to the decrease in nonfat dry milk/skim milk powder and dry whey exports. Even though exports declined in volume they increased 10% in value to $691.5 million. Cheese exports posted the eleventh consecutive month of gain. Butterfat exports were phenomenal with a gain of 126% from a year earlier. USDA will release the World Agricultural Supply and Demand and Quarterly Grain Stocks reports on Friday.
AVERAGE CLASS III PRICES:
| 3 Month: | $20.64 |
| 6 Month: | $20.11 |
| 9 Month: | $19.97 |
| 12 Month: | $19.97 |
CHEESE:
It is interesting to note that reports from California indicated cheese production schedules are generally stronger. This is surprising given the fact that overall milk production and milk per cow were down significantly in November. Certain varieties of cheese have tighter supplies as there has been a trend toward specialty varieties. Domestic cheese demand is termed as stronger for this time of year which has moved cheese prices from their lows and is providing support.
BUTTER:
Butter churning is back on full schedule with abundant cream supplies. Butter is available on the spot market as manufacturers try to avoid inventory building too much. Buyers seem interested in purchasing extra loads ahead of time to protect against the potential for higher prices. The price is expected to remain supported but choppy.
OUTSIDE MARKETS SUMMARY:
March corn closed up 2.00 cents per bushel at $4.5600, March soybeans closed up 4.50 cents at $9.9900 and March soybean meal closed down $1.50 per ton at $299.30. March Chicago wheat closed down 2.25 cents at $5.3400. February live cattle closed up $3.90 at $197.60. February crude oil is up $0.84 per barrel at $74.16. The Dow Jones Industrial Average and the Nasdaq were closed today.
