GENERAL OVERVIEW:
Class III milk futures closed higher, responding to the higher block cheese prices and short covering after two days of price weakness last week. Class IV futures closed mixed despite the spot butter price increasing. The World Agricultural Supply and Demand report will be released on Tuesday.
MILK:
It was no surprise that Class III futures were higher today after two days of lower prices despite the increase in the block cheese price last week. Class III futures had to adjust higher to move somewhat back in line with the cash price. Milk production is improving weekly as cow numbers increase and output per cow rises due to improving cow comfort. Grain prices were rising last week, supported by strong outside markets, primarily by the strength of crude oil. This caused concern over the potential for increasing feed prices, higher fuel prices, and higher fertilizer prices. That took a turn today as crude oil exploded overnight, moving substantially higher than $100 per barrel, only to fall back over $25 per barrel by the end of the day. This turn in the price took the support out of the grain prices. The World Agricultural Supply and Demand Estimates report will be released on Tuesday and will impact grain prices. The report will also contain the USDA's estimates for milk production and dairy product prices for this year.
AVERAGE CLASS III PRICES:
| 3 Month: | $17.03 |
| 6 Month: | $17.63 |
| 9 Month: | $17.91 |
| 12 Month: | $17.81 |
CHEESE:
The upside potential for cheese may be limited as milk production increases and the days move closer to the beginning of the spring flush period. Increased milk production will be handled without difficulty, as increased manufacturing capacity is available. Higher milk output will move more milk to the cheese vat as fluid milk demand is expected to remain steady.
BUTTER:
The butter price increased today, but butter futures did not rebound from the losses on Friday. Earlier, higher prices could not hold, with futures falling back into the close of trading. The butter market will need to prove that the price will find solid support and move higher. Domestic butter demand has improved, and international demand remains strong, which should provide support.
OUTSIDE MARKETS SUMMARY:
May corn closed down 6.75 cents per bushel at $4.5375, May soybeans closed down 4.50 cents at $11.9625 and May soybean meal closed down $3.70 per ton at $313.50. May Chicago wheat closed down 13.50 cents at $6.0325. April live cattle closed down $4.43 at $230.15. April crude oil is up $3.87 per barrel at $94.77. The Dow Jones Industrial Average is up 239 points at 47,741, with the NASDAQ up 308 points at 22,696.
