Tuesday Morning Dairy Market Update - Further Strength May Be Limited

OPENING CALLS:

Class III Milk Futures:	3 to 5 Higher
Class IV Milk Futures:	Mixed
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	1 to 2 Higher
Soybean Futures:	1 to 2 Lower
Soybean Meal Futures:	Steady to $1 Higher
Wheat Futures:	2 to 4 Higher

MILK:

Class III milk futures have had a substantial rebound in prices over the past few weeks, while Class IV futures have been steady to lower. Cheese prices show more promise, while the butter price is expected to remain in a range. Class III futures are above Class IV futures in nearby months. This has not happened often over the past few years. The spread between cheese and butter has been narrowing. The strength has been a surprise due to increasing milk production and readily available cheese supplies. However, buyers may be purchasing ahead as a hedge against the potential for higher prices and increased demand later in the year. USDA will release the March Dairy Products report this afternoon.

CHEESE:

There may be limited upside potential for cheese, but there could be further buying interest before that level is reached. Cheese prices reached resistance on April 17 at $1.8350 and then fell back. The block price is 6 cents below that level and may have difficulty reaching back to that level. Cheese output is increasing as milk production increases.

BUTTER:

The butter price is near the top of the trading range it has been in over the past two months and may have difficulty finding renewed buying interest at this level. Buyers have been able to purchase butter at lower prices, eliminating the need to be aggressive at higher prices.