GENERAL OVERVIEW:
Class III futures closed lower while Class IV contracts were mixed. Traders again found little to set market direction other than limited upside potential. Blocks continue to show weakness.
MILK:
Most have resigned to the fact that milk prices will remain low for an extended period of time. Farmers continue to push milk production to compensate for lower prices. Cash flow has tightened significantly, but the desire to keep barns full remains. Prices move in cycles, and the idea is that this cycle may run its course as well. However, the fundamentals that have put the market in the current situation are different than any other time. This may extend the period of low milk prices. Culling is expected to increase, but it may take some time to reduce the herd to a point where milk supply will tighten. The best would be to increase demand, but that may be difficult during the first half of the year when demand is usually slower. Winter weather is having an impact in some areas, reducing milk output and causing transportation issues. However, those are disruptions and do not have a long-term impact.
AVERAGE CLASS III PRICES:
| 3 Month: | $15.56 |
| 6 Month: | $15.88 |
| 9 Month: | $16.28 |
| 12 Month: | $16.58 |
CHEESE:
There has not been a monthly cold storage report released since the government shutdown. The report will be released on Dec. 23, and hopefully, it may show less inventory than anticipated, which could generate some excitement in the market. However, strong cheese production may have limited the decline of inventory and may provide a reason as to why cheese prices are this low.
BUTTER:
Traders are not getting overly excited about the butter price holding and slowly increasing. The increased butterfat content in milk, strong milk production, and plentiful cream supplies will limit the upside price potential of butter for some time. The best we may hope for is that the market may have established a bottom.
OUTSIDE MARKETS SUMMARY:
March corn closed up 2.25 cents per bushel at $4.4650, January soybeans closed up 2.25 cents at $10.9350 and January soybean meal closed up $.90 per ton at $302.10. March Chicago wheat closed up 4.00 cents at $5.3350. February live cattle closed up $2.43 at $230.95. January crude oil is down $0.57 per barrel at $57.89. The Dow Jones Industrial Average is up 646 points at 48,704, with the NASDAQ down 60 points at 23,594.
