OVERVIEW:
Traders finally got excited in the milk market today. Class III futures jumped following the strength of cheese and butter prices. This may not indicate a change in trend, but it does provide some relief to the bearish market sentiment.
MILK:
Class III milk futures from September through December are above $18.00. Today's strength moved the September contract above that level after spending 2 weeks below $18.00. There has not been a change in fundamentals over the weekend. Cheese buyers likely needed to fill orders, causing them to be aggressive. Class III futures did not hold their highs of the day as short covering ran its course and contracts settled back. Some of the hot weather that has been experienced has tempered in some areas, improving cow comfort. Milk production will not surge as a result but will rebound to some extent. Dairy Farmers of America (DFA) and Select Milk Producers cooperatives have agreed to pay $34.4 million to settle a class action lawsuit against them. The lawsuit alleged that the cooperatives conspired to fix the price of raw milk in the southwestern U.S., resulting in lower farm incomes. DFA will pay $24.5 million and Select Milk Producers will pay $9.9 million.
AVERAGE CLASS III PRICES:
| 3 Month: | $17.94 |
| 6 Month: | $18.05 |
| 9 Month: | $17.98 |
| 12 Month: | $17.97 |
CHEESE:
The jump in cheese prices was enough to trigger buying interest in Class III futures, both from short covering as well as new buying, to hopefully ride the wave and take a quick profit. There has not been a surge in demand, but buyers may increase their interest in buying as they look ahead to demand later in the year. Traders will exercise caution with the strength as supplies are sufficient for demand.
BUTTER:
The butter price is likely to remain in a range for now. There may be limited upside price potential as supply is readily available for demand. Bulk butter is reported to be selling below the CME price in some locations due to its abundance. Earlier in the year, bulk butter was frozen and stored for later demand. With ongoing butter production, plants want to limit the increase of supply at the plant level and have been moving it to the market.
OUTSIDE MARKETS SUMMARY:
December corn closed down 3.75 cents per bushel at $4.0700, November soybeans closed up 5.25 cents at $9.9450 and December soybean meal closed up $4.50 per ton at $285.00. September Chicago wheat closed steady at $5.1675 and October live cattle closed up $0.43 at $224.10. September crude oil is down $1.23 per barrel at $66.10. The Dow Jones Industrial Average is up 585 points at 44,174, with the NASDAQ is up 403 points at 21,054.
