GENERAL OVERVIEW:
Class III milk futures closed steady to higher due to the strength of the spot cheese and dry whey prices. Class IV futures were mixed with contracts through September steady to higher, with later contracts lower. Even with the movement of the underlying cash prices, the market showed little solid direction.
MILK:
The price swings that have been prevalent in spot prices have done little to determine the market direction. The current fundamentals are such that there is little reason to be concerned over the supply of milk. Plentiful milk means there should be a sufficient supply of dairy products for demand. There has been no indication of milk production slowing down. This may leave milk prices with limited upside price potential and could possibly result in the current milk futures prices rolling down as they move close to settlement. Class III futures show the highest price for the year in October at $18.10. Class IV has the highest price in September at $18.12. These are not exceptional prices, but coupled with the high prices received by calves, they would increase profitability significantly from the current level for many farms.
AVERAGE CLASS III PRICES:
| 3 Month: | $15.86 |
| 6 Month: | $16.56 |
| 9 Month: | $17.01 |
| 12 Month: | $17.14 |
CHEESE:
The gain in the block cheese price supported the market today, but the potential for a continued increase in price is likely limited. The current fundamentals suggest the best we may hope for is continued choppiness. Without slowing milk production and increased demand, there is little reason for cheese prices to trend higher.
BUTTER:
The spot butter price did not change today, leaving traders uncertain over price direction. This was reflected in butter futures, with contracts closing mixed. There were six unfilled bids and six uncovered offers remaining at the close. This provides little direction for potential trade on Wednesday.
OUTSIDE MARKETS SUMMARY:
March corn closed down 5.50 cents per bushel at $4.2625, March soybeans closed up 1.00 cent at $11.3400, and March soybean meal closed down $3.40 per ton at $305.80. March Chicago wheat closed down 11.00 cents at $5.3775. April live cattle closed up $2.18 at $242.80. March crude oil is down $0.56 per barrel at $62.33. The Dow Jones Industrial Average is up 32 points at 49,533, with the NASDAQ is up 32 points at 22,578.
