OVERVIEW:
Milk futures sold off heavily in response to the weakness of the underlying cash. There was also some caution over the milk production report that was to be released. The report showed July milk production went up 3.4% over July 2024, putting further pressure on the market in late afternoon trading.
MILK:
The milk production report likely solidified the reality that milk prices may have limited upside potential throughout the rest of the year. Milk production in the top 24 states was 3.5% above July 2024. July production totaled 18.8 billion pounds. Milk production per cow jumped 36 pounds from a year ago, averaging 2,081 pounds. Cow numbers increased by 8,000 head from June, totaling 9.040 million head. This is 154,000 more than July 2024. Milk production in the U.S. totaled 19.6 billion pounds, up 3.4% from July 2024. Milk production per cow jumped 34 pounds to 2,063. Cow numbers increased by 10,000 head from June, with the total milk cow herd at 9.485 million head. This is 159,000 more than a year ago. The nation's dairy herd is the largest it has been since July 2021. This is the largest percentage increase so far this year, and at a time when milk production decreases due to hot weather. This is a bearish report, indicating that milk production will remain strong, keeping a sufficient milk supply available for demand.
AVERAGE CLASS III PRICES:
| 3 Month: | $17.78 |
| 6 Month: | $17.73 |
| 9 Month: | $17.68 |
| 12 Month: | $17.71 |
CHEESE:
The block cheese price again fell faster than it increased and nearly eliminated the gains realized since the previous decline. Substantially higher milk production than a year ago in July will make it more difficult for prices to see much upside price potential. Cheese buyers may be less willing to purchase supplies aggressively, as there should be sufficient supply for demand. The July Cold Storage report will be released on Friday and is expected to show further increases in inventory.
BUTTER:
The fundamentals of butter have been more bearish than cheese, and the milk production report will maintain that bearishness. Ice cream production is slowing, and greater volumes of milk are being standardized for school accounts, leaving more cream available for churning. The July Cold Storage report is expected to show inventory below a year ago, but an increase in supply from June.
OUTSIDE MARKETS SUMMARY:
December corn closed up 7.75 cents per bushel at $4.1175, November soybeans closed up 20.00 cents at $10.5600 and December soybean meal closed down $3.00 per ton at $294.20. December Chicago wheat closed up 1.50 cents at $5.2975. October live cattle closed down $0.13 at $234.73. October crude oil is up $0.81 per barrel at $63.52. The Dow Jones Industrial Average is down 153 points at 44,786, with the NASDAQ down 73 points at 21,100.
