GENERAL OVERVIEW:
Class III and Class IV milk futures diverged Tuesday, with Class III higher and Class IV lower. Class IV traders focused more on the weakness of nonfat dry milk rather than the strength of butter. The February futures and options contracts closed Tuesday with the Federal Order prices announced on Wednesday.
MILK:
Class III futures have been volatile over the past two weeks, but prices in nearby contracts have remained sideways while the August and later contracts make new highs. Class IV futures continue to remain supported by the strong butter price despite the weakness of futures Tuesday. Much of the activity is short-term trading as traders attempt to take advantage of the price swings. Higher prices do allow hedgers to protect significantly better prices than were available a month ago. The February futures and options contracts closed Tuesday with the Federal Order prices announced on Wednesday. The trade estimates a Class III price of $14.91, which would be $0.32 higher than January. The estimate for Class IV is $16.10 and would be $2.55 than in January. The state of Idaho has again become the No. 3 state for milk production in 2025, taking the spot away from Texas.
AVERAGE CLASS III PRICES:
| 3 Month: | $17.34 |
| 6 Month: | $17.83 |
| 9 Month: | $18.00 |
| 12 Month: | $17.85 |
CHEESE:
The rebound of the block cheese price keeps the uptrend intact. The upside potential in price may be limited unless the strength of butter leads the market higher. Cheese production is increasing as milk output increases seasonally. Current cheese supplies are sufficient for demand, with little reason for traders to become very aggressive in building inventory.
BUTTER:
Butter futures did not respond to the increase in the spot butter price Tuesday. Futures did not move limit-up on Monday despite the large increase in the spot price. Futures already had much of it factored in with the premium contained in futures. Futures may rise and fall, maintaining seasonal premiums.
OUTSIDE MARKETS SUMMARY:
May corn closed up .75 cent per bushel at $4.4650, May soybeans closed up 6.50 cents at $11.7050, and May soybean meal closed up $1.80 per ton at $314.70. May Chicago wheat closed down 3.25 cents at $5.7400. April live cattle closed up $1.03 at $234.13. April crude oil is up $3.77 per barrel at $75.00. The Dow Jones Industrial Average is down 404 points at 48,501, with the NASDAQ down 232 points at 22,517.
