OVERVIEW:
Milk futures generally close lower for both Class III and Class IV contracts. The weakness in Class IV futures is understandable due to the decline in the butter price. However, Class III futures showed weakness despite the strength in cheese prices. USDA released the July Federal Order class prices.
MILK:
Class III futures were under pressure again, with the October contract making new lows. If the current fundamentals persist, later contracts will continue to erode as time unfolds, and the premium is taken from futures contracts. The August contract held just above $17.00 today, with the low being $17.01. The butter price declined today, putting some pressure on Class IV futures. Class IV prices have not been quite as bearish, but they indicate traders are not anticipating significant strength throughout the rest of the year. The USDA released the July Federal Order class prices today, with all categories lower than the previous year. The Class II price is $19.31, up $0.88 from June but down $2.51 from July 2024. The Class III price is $17.32, down $1.50 from June and down $2.47 from a year ago. The Class IV price is $18.89, up $0.59 from June, but down $2.42 from July 2024. The USDA will release the June Agricultural Prices report on Thursday, providing the average prices used in the calculation of the income over feed for the month.
AVERAGE CLASS III PRICES:
| 3 Month: | $17.44 |
| 6 Month: | $17.71 |
| 9 Month: | $17.74 |
| 12 Month: | $17.80 |
CHEESE:
Milk production has been impacted by hot weather, but at the same time, it remains higher than a year ago. Spot milk is still available below class, with spot milk prices ranging from $3.00 below class to $1.00 over class. Some plants see lower milk receipts and tightening milk supplies but are unwilling to pay for spot milk that is priced above class. They opt to reduce manufacturing schedules for the time being. Most plants continue to operate on full schedules, as milk production remains strong and orders need to be filled.
BUTTER:
The decline in the butter price today renews a negative tone in the market. The longer the price is unable to trend higher, the less chance there is for the price to reach $3.00 before the usual price peak in October. Manufacturers continue to move supply to the spot market rather than hold onto it. They see limited upside price potential.
OUTSIDE MARKETS SUMMARY:
December corn closed up 1.25 cents per bushel at $4.1225, November soybeans closed down 13.75 cents at $9.9575 and December soybean meal closed down $2.00 per ton at $274.50. September Chicago wheat closed down 6.00 cents at $5.2375. October live cattle closed up $3.28 at $229.73. September crude oil is up $1.09 per barrel at $70.30. The Dow Jones Industrial Average is down 172 points at 44,461, with the NASDAQ up 31 points at 21,130.
