A little strength in the block cheese prices was enough to generate volatility as traders try to scalp a profit out of Class III futures. Class IV futures regained the losses of Tuesday, with the strength in nonfat dry milk more than offsetting the weakness of butter.
MILK:The choppiness continued in milk with Class III futures rebounding from new contract lows that were established on Tuesday. Class IV futures regained much of what was lost over the previous two days. The support in Class IV futures is all from the strength of nonfat dry milk. The butter price revisited the low set on July 28th, keeping the bearishness alive that has been prevalent since early March. The inability of the butter and cheese prices to show strength at this time of year is concerning. Most years, prices improve through the Fall and then peak once holiday demand is satisfied. However, even though demand is good, it is not sufficient to keep up with production and tighten supplies. The near-term outlook does not look to be much different.
AVERAGE CLASS III PRICES:| 3 Month: | $16.44 |
| 6 Month: | $16.72 |
| 9 Month: | $16.96 |
| 12 Month: | $17.14 |
There is no reason for cheese prices to increase. Sufficient supply remains available to the market. Farmers continue to maintain cow numbers and push milk production. Cheese output remains steady and will increase as milk production improves, and cooler weather improves cow comfort. Export demand remains strong and is helping to limit the building of inventory, but international and domestic demand is not tightening supplies.
BUTTER:
The weakness of butter is very concerning, with the price back to the low last seen on July 28th. It is now only 8 cents from the low for the year established in mid-January. Buyers remain unaggressive as sellers continue to offer substantial volumes of butter on the daily spot market. Supplies for later demand are being purchased without difficulty.
OUTSIDE MARKETS SUMMARY:December corn closed down 5.75 cents per bushel at $5.2775, November soybeans closed down 6.75 cents at $13.0950, and December soybean meal closed up $1.60 per ton at $351.40. December Chicago wheat closed down 18.25 cents at $7.2875. October live cattle closed down $1.18 at $215.85. October crude oil is up $3.84 per barrel at $96.87. The Dow Jones Industrial Average is down 405 points at 52,381, with the NASDAQ down 169 points at 26,253.
