GENERAL OVERVIEW:
Milk futures closed higher in all contracts except for the January Class III contract. Traders focused on the strength of block cheese and nonfat dry milk rather than the weakness of butter and dry whey. The Global Dairy Trade auction trade-weighted average was 6.3% higher than the previous event.
MILK:
Milk futures have made a nice rebound over the past two days. The block cheese price increased today, but the lower dry whey price offset the gain. Traders turned more aggressive despite the likelihood of limited upside potential. The January Class III contract closed lower, as much of the contract is priced, and it is adjusting to the underlying cash. Traders focused on the strength of nonfat dry milk rather than the weakness of butter, which resulted in Class IV futures closing steady to higher. The Global Dairy Trade auction on Tuesday showed the trade-weighted average increasing 6.3% from the previous event. This is the first gain after nine consecutive declines. Anhydrous milk fat jumped 7.4% to $6,011 per metric ton or $2.73 per pound. Butter increased 3.8% to $5,206 per metric ton or $2.36 per pound. Buttermilk powder increased 5.1% to $3,027 per metric ton or $1.37 per pound. Cheddar cheese increased 0.6% to $4,665 per metric ton or $2.12 per pound. Lactose was 1,413 per metric ton or $0.64 per pound. Skim milk powder increased 5.4% to $2,564 per metric ton or $1.16 per pound. Whole milk powder jumped 7.2% to $3,407 per metric ton or $1.55 per pound. Mozzarella increased 0.7% to $3,418 per metric ton or $1.55 per pound.
AVERAGE CLASS III PRICES:
| 3 Month: | $15.24 |
| 6 Month: | $15.82 |
| 9 Month: | $16.37 |
| 12 Month: | $16.67 |
CHEESE:
Schools reopening after the holidays have reduced the volume of milk on the spot market. Prices are recorded from $1.00 to $5.00 under class. There are some reports indicating domestic cheese demand is strong and shows some signs of increasing. However, the level of cheese output in comparison to demand indicates limited upside price potential.
BUTTER:
Butter manufacturers continue to run a full schedule due to the heavy cream supply. The high butterfat content of milk keeps plenty available for churning. International demand remains strong as the price on the Global Dairy Trade auction is $1.0375 higher than the U.S. price. This price difference will keep international buying interest strong.
OUTSIDE MARKETS SUMMARY:
March corn closed up 2.75 cents per bushel at $4.4675, March soybeans closed up 10.75 cents at $10.6700 and March soybean meal closed up $5.90 per ton at $305.40. March Chicago wheat closed up 7.50 cents at $5.1800. February live cattle closed down $2.10 at $234.53. February crude oil is down $0.82 per barrel at $56.31. The Dow Jones Industrial Average is down 466 points at 48,996, with the NASDAQ up 37 points at 23,584.
