GENERAL OVERVIEW:
Milk futures diverged with Class III contracts higher and Class IV lower following the direction of the underlying cash. Trading volume in Class III futures was good. The U.S. imposed a 50% tariff on products for Canada. The June Milk Production report will be released tomorrow.
MILK:
Class III futures regained about half of their losses from Monday even though the block cheese price increased 3 cents and should have provided further support. The losses on Monday might be regained as the week progresses. Class IV futures showed pressure, moving contracts further below those of Class III. The June Milk Production report will be released on Wednesday. I estimate milk production to be up 2.2% from a year ago with cow numbers up 4,000 head from May. Trade tensions with Canada increased Monday as the U.S. imposed 50% tariffs on a wide range of Canadian goods, directly targeting key economic sectors including alcohol, dairy products, cars, seeds, floriculture products, flower bulbs, lumber and animal products. At the center of the dispute is a long-standing friction over Canada's dairy supply management system and its handling of tariff-rate quotas for imported cheese and milk protein products. Washington charges that Canadian regulatory agencies continuously manipulate access for U.S. dairy products to shield domestic processors. The new 50% import duties follow direct pressure from major U.S. agricultural groups such as the National Milk Producers Federation and the Dairy Export Council, which have demanded retaliatory action for non-compliance.
AVERAGE CLASS III PRICES:
| 3 Month: | $16.91 |
| 6 Month: | $17.29 |
| 9 Month: | $17.33 |
| 12 Month: | $17.36 |
CHEESE:
The block cheese price matched the high reached on May 6. The price fell substantially after that date. It is not anticipated to follow the same pattern, as it is a different time of year. Market fundamentals are much the same, but buyer interest generally increases for upcoming fall and holiday demand. If the price moved another 1.50 cents higher, it would then be back to the highest level since October 31.
BUTTER:
The rebound of spot butter from the low today does not necessarily indicate that support has been found. The movement was just a matter of buyers and sellers doing business. The continued weakness of Grade A nonfat dry milk will remain an anchor on Class IV futures.
OUTSIDE MARKETS SUMMARY:
December corn closed up 2.25 cents per bushel at $4.7525, November soybeans closed down 3.50 cents at $12.2275, and December soybean meal closed up $3.50 per ton at $327.30. September Chicago wheat closed up 4.00 cents at $6.7800. October live cattle closed down $0.08 at $223.23. September crude oil is up $1.86 per barrel at $84.34. The Dow Jones Industrial Average is up 375 points at 52,214, with the NASDAQ up 329 points at 25,837.
