GENERAL OVERVIEW:
Milk futures had a strong day with double-digit gains in numerous contracts. The increase in the block cheese price fueled the rally in Class III futures. The strength of the overnight trade carried through Tuesday.
MILK:
The strength of milk futures was unexpected, as it had been anticipated that spot prices would drift through the end of the year. The buying interest in block cheese did not have an impact on milk futures on Monday, but that changed with the gain in the cheese price on Tuesday. There has not been a change in the fundamentals, which is a cause for concern, as it may indicate that there may be limited support under the market for the longer term. Milk production remains strong and is expected to be that way for some time to come. There was an article calling for farmers to cull cows to improve milk prices. That is a noble idea and would take in a usual market, such as we have seen in the past. If beef on dairy calf prices were not very strong, and replacement heifer prices were significantly lower, culling would follow the usual and historical pattern. But this is a different market, and farmers likely will have little desire to increase culling in the hope that milk prices may improve unless all do it collectively, which is unlikely. USDA will release the December Federal Order class prices on Wednesday.
AVERAGE CLASS III PRICES:
| 3 Month: | $15.71 |
| 6 Month: | $16.07 |
| 9 Month: | $16.53 |
| 12 Month: | $16.85 |
CHEESE:
The strength in the cheese price was welcomed, as buyers stepped up in the past two days, purchasing 19 loads of blocks. Wednesday is the final trading day of the year, and it will be interesting to see whether buyers will remain aggressive. Cheese production has increased as more milk has moved to manufacturing due to schools being closed for the holiday season.
BUTTER:
At least butter has been holding and not falling to new lows. This remains a concern, as cream supplies remain plentiful. Butter production is expected to remain strong, potentially increasing butter supplies significantly when demand slows due to the time of year.
OUTSIDE MARKETS SUMMARY:
March corn closed down 1.75 cents per bushel at $4.4050, March soybeans closed down 1.25 cents at $10.6225 and March soybean meal closed down $1 per ton at $302.30. March Chicago wheat closed down 2.25 cents at $5.1075. February live cattle closed up $1.50 at $230.48. February crude oil is down $0.13 per barrel at $57.95. The Dow Jones Industrial Average is down 95 points at 48,367, with the NASDAQ down 55 points at 23,419.
