GENERAL OVERVIEW:
At least there was some life in milk futures today. Class III futures increased, correcting from the large declines over the past week. Class IV jumped due to the strength of butter and nonfat dry milk in the spot market. Walmart opens its third milk processing facility.
MILK:
It was encouraging to see some higher milk futures prices today after a week of pressure. Class III futures increased due to the market being overdone to the downside, as the underlying cash did not support its strength. Class IV futures increased from higher butter and nonfat dry milk prices. Futures have a long way to go to regain the losses and will need to see further support from the underlying cash, or they will be unable to maintain the strength. The current market fundamentals do not suggest any supply tightness in cheese or butter. The supply tightness is clearly evident in nonfat dry milk as it moved to another all-time high today. Even at the high price, demand is strong, with buyers not reaching a threshold. The level at which demand will slow is uncertain and will be higher than it is now. Walmart opened its third milk processing facility in Robinson, Texas. Their first facility was in Fort Wayne, Indiana, with the second last year in Valdosta, Georgia. They continue to invest in processing and distribution to develop an end-to-end supply chain for milk.
AVERAGE CLASS III PRICES:
| 3 Month: | $17.48 |
| 6 Month: | $18.07 |
| 9 Month: | $18.08 |
| 12 Month: | $17.94 |
CHEESE:
The block cheese price shows little direction. Business is being done as buyers and sellers see fit. There is little reason for buyers to be aggressive as there is for sellers. International demand is strong, and although the volume is substantially higher than a year ago, it is not providing substantial support to the market. The expectation is for the price to remain rangebound for the near term..
BUTTER:
The bounce butter is being met with skepticism, as the pattern has been that weakness follows an increase. The result has been new lows as sellers again turn aggressive. This pattern will cease at some point, but it is uncertain if this will be the time. The prices should be low enough to generate strong buying interest, but sellers continue to offer supplies to the market at whatever price is needed to move supplies.
OUTSIDE MARKETS SUMMARY:
July corn closed down 5.75 cents per bushel at $4.8000, July soybeans closed down 11.25 cents at $12.1150, and July soybean meal closed down $.50 per ton at $320.40. July Chicago wheat closed down 13.25 cents at $6.2775. June live cattle closed up $1.48 at $253.23. June crude oil is down $4.15 per barrel at $102.27. The Dow Jones Industrial Average is up 356 points at 49,298, with the NASDAQ up 258 points at 25,326.
