OVERVIEW:
Both Class III and IV futures posted similar losses, with most contracts showing double-digit losses. Traders still hold an overall bearishness in the market and continue to remain cautious.
MILK:
There is a tug of war between the potential for higher prices seasonally and the overall choppiness and times of weakness in the market. Higher milk output than a year ago may keep the upside price potential limited moving through the last half of the year. The USDA will release the July Milk Production report on Thursday. It is expected to show strong milk production relative to a year ago. I estimate milk production to be 2.9% above a year ago, with cow numbers up 4,000 head from June.
The Global Dairy Trade auction took place on Tuesday, resulting in the trade-weighted average declining 0.3% from the previous event. There were 36,553 metric tons of dairy products sold at an average price of $4,291 per metric ton. Anhydrous milk fat increased 0.1% to $7,078 per metric ton or $3.21 per pound. Butter decreased 1.0% to 7,144 per metric ton or $3.24 per pound. Cheddar cheese decreased 0.5% to $4,548 per metric ton or $2.06 per pound. Mozzarella decreased 2.7% to $4,447 per metric ton or $2.20 per pound. Skim milk powder decreased 1.8% to $2,756 per metric ton or $1.25 per pound. Whole milk powder increased 0.3% to $4,036 per metric ton or $1.83 per pound.
AVERAGE CLASS III PRICES:
| 3 Month: | $18.01 |
| 6 Month: | $17.91 |
| 9 Month: | $17.84 |
| 12 Month: | $17.85 |
CHEESE:
Cheese output is steady to lighter in some cases due to lower milk production, due to weather impact, and more fluid milk moving to deficit areas for school system needs. Periods of cooler weather have resulted in slight increases in production. Spot milk availability has tightened in some areas, with prices ranging from $3.00 under to $2.00 over class. Cheese contracts and immediate orders are being filled without difficulty.
BUTTER:
The butter price is headed down to the previous low of $2.28. If it moves below that level, it will move back to the lowest level since April 29. It appears the butter price may have limited upside potential throughout the rest of the year if the current fundamentals persist. There are reports of butter production picking up as cream becomes available.
OUTSIDE MARKETS SUMMARY:
December corn closed up .75 cent per bushel at $4.0400, November soybeans closed up 2.25 cents at $10.3600 and December soybean meal closed up $1.30 per ton at $297.20. December Chicago wheat closed up 7.00 cents at $5.2825. October live cattle closed up $3.50 at $234.85. October crude oil is up $0.94 per barrel at $62.71. The Dow Jones Industrial Average is up 16 points at 44,938, with the NASDAQ down 142 points at 21,173.
