GENERAL OVERVIEW:
It was another dismal day for Class III milk futures as the block cheese price moved to a six-year low. The October contract fell below $15.00. The September futures contracts ceased trading, with the Federal Order class prices to be announced on Wednesday.
MILK:
Class III milk futures were under significant pressure again today in response to the decline in the block cheese price. The dry whey price is minimizing the weakness as it continues to increase, moving to the highest level since February 22, 2022. The low milk prices are beginning to have more impact as the calf prices are not making up for the decline in milk income. This may increase culling primarily on small dairy farms initially before triggering increased culling on large dairy farms. Class IV futures were strong as traders focused on the strength in nonfat dry milk rather than the weakness in butter. The spread between Class III and Class IB futures continues to widen. The September Federal Order class prices will be released on Wednesday. The trade anticipates a Class III price of $16.01 and a Class IV price of $19.08.
AVERAGE CLASS III PRICES:
| 3 Month: | $15.26 |
| 6 Month: | $15.84 |
| 9 Month: | $16.24 |
| 12 Month: | $16.55 |
CHEESE:
The block cheese price fell to the lowest level since May 5, 2020. The expansion of milk production, as cows continued to be added, is providing plentiful milk for manufacturing. The low prices have not yet increased demand sufficiently to tighten supply. Buyers are complacent, seeing no reason to purchase aggressively, which could result in building supply at a time when they do not need to.
BUTTER:
The butter price continues to struggle as butter production increases due to increased cream supplies. Inventory in August declined seasonally, but the decline was less than usual. This has resulted in butter in cold storage being 10% above a year ago.
OUTSIDE MARKETS SUMMARY:
December corn closed down 1.00 cent per bushel at $5.2200, November soybeans closed up 9.50 cents at $12.9775, and December soybean meal closed down $.40 per ton at $359.00. December Chicago wheat closed up 4.00 cents at $6.9275. December live cattle closed unchanged. November crude oil is down $3.66 per barrel at $88.94. The Dow Jones Industrial Average is down 132 points at 51,350, with the NASDAQ down 23 points at 26,798.
