GENERAL OVERVIEW:
It was a banner day for milk futures with the largest gains seen in quite some time. A few contracts. A few contracts closed limit up as futures moved relative to the underlying cash. There is uncertainty over whether the strength will be maintained.
MILK:
It has been quite some time since we have seen multiple futures contracts moving limit up in one day. The February Class III contract increased $1.01 over the past 2 days. The March Class III contract has increased by $1.14, with the April contract up $1.16. This moves the nearby futures prices to the highest level since November. There has not been release of any program or any substantial surge in demand supporting the move. This has been a surprise due to the bearishness of the December Milk Production report. December showed the second-largest increase for the year at 4.4%. The addition of 9,000 cows in December resulted in 212,000 more cows than a year ago, totaling 9.567 million head. Milk production in the fourth quarter was up 4.2% compared to the previous year. There were five states that showed milk production declines in December. Washington was down 6.0%; New Mexico was down 4.9%; Pennsylvania was down 2.4%; Illinois was down 1.4%; and Virginia was down 0.9%. Kansas increased 26.2% with South Dakota up 11.4%. California had a large increase with a gain of 9.6%.
AVERAGE CLASS III PRICES:
| 3 Month: | $15.70 |
| 6 Month: | $16.40 |
| 9 Month: | $16.88 |
| 12 Month: | $17.11 |
CHEESE:
It seemed as if there was some knowledge of the strong increase in cheese prices due to milk futures being substantially higher prior to spot trading. The December Cold Storage report was considered neutral, indicating sufficient supplies of cheese are available for demand. It is good to see the strength of the market over the past two days, but there is concern about whether the strength will hold without further solid fundamental support.
BUTTER:
Butter futures pushed substantially higher, trying to catch up with the substantial move in the spot market on Friday. It seemed like traders were holding numerous short positions in butter futures and got caught on the wrong side.
OUTSIDE MARKETS SUMMARY:
May corn was down 2.00 cents at $4.3925. May soybeans declined5.50 cents to close at $10.74. May wheat declined 5.75 cents to close at $5.4575. May live cattle increased $1.07, closing at $238.00. March crude oil declined $0.44 to close at $60.63 per barrel. The Dow increased 314314 points to close at 49,412 with the NASDAQ up 100 points at 23,601.
