Tuesday Morning Dairy Market Update - Futures Locked Limit Up

 Opening Calls:

Class III Milk Futures:	20 to 75 Higher
Class IV Milk Futures:	Mixed
Butter Futures:	1 to 2 Lower

Outside Market Opening Calls:

Corn Futures:	2 to 5 Higher
Soybean Futures:	15 to 25 Higher
Soybean Meal Futures:	$2 to $4 Higher
Wheat Futures:	5 to 10 Higher

Milk:

Class III milk futures exploded overnight with some contracts reaching limit up shortly after trading opened. Trading volume is one of the largest I have seen with contracts through February 2022 showing activity. I have yet to see any solid reason for support for the huge turn-around from Monday. There has been no press release from the government over a food program and there have been no solicitations put out for the purchase of dairy products for any program as of Tuesday morning. This is like what took place in the market just before Christmas, but that was a reaction to the stimulus bill and a jump in cheese prices. Traders certainly are excited over something that has rippled through the market. The only other news was from Citi Bank, which indicated that China's Mengniu Dairy has positioned itself over the past few years to better meet the higher demand for dairy products in China. Some news over a Food Box program or support from underlying cash will need to follow Tuesday or this will be an emotional rally. It might be an indication as to the volatility we may be facing this year.

Cheese:

The movement of cheese prices Monday certainly does not support the strength of milk futures overnight. The weakness of cheese prices Monday would suggest further weakness Tuesday. However, the trade does not think so. Cheese futures showed a high volume of trades with February and March limit up. It certainly will be an interesting day.

Butter:

Butter futures have not followed the exuberance in cheese and Class III futures. Some contracts were traded, but there has been little market movement. Overall weakness is the dominating factor in the market as supply is readily available and churning active. Price is expected to remain choppy.

Monday Closing Dairy Market Update - Class III Futures Fall

MILK

Class III milk futures extended the losses that were seen on the last trading day of 2020. Greater pressure was seen Monday due to the decline of cheese prices. This caught some traders off guard as the anticipation was for cheese to follow the pattern of last week and continue higher. Although all months came under selling pressure, later months were able to hold well, showing minor losses. Futures from February through December remain above $17. There is concern of heavy milk supplies potentially overwhelming the market as many milk plants are running at capacity and milk production continues to increase. It is a slower-demand time of year, which may have a significant impact on milk prices. Traders are not very apt to buy into the market very quickly now that cheese prices have fallen back. The market will need to prove itself.

AVERAGE CLASS III PRICES

3 Month:	$16.61
6 Month:	$16.92
9 Month:	$17.07
12 Month:	$17.11

CHEESE

The decline of cheese prices sent a warning shot over the bow. It may indicate that supply is expected to be larger than demand for the near term. It is unclear just what the stimulus bill will do for dairy demand in and of itself. There is money appropriated for food programs, but it doesn't specifically indicate how much would be for dairy products. The proof will be when USDA puts out solicitations and if demand increases overall. Strong milk production will increase cheese production and likely begin to increase inventory. Buyers have been active but are buying without being very aggressive.

BUTTER

Price moved to the lowest level since Nov. 30. This does not bode well for price outlook as inventory has finished the year substantially higher than last year with reports indicating stocks are already building from the previous month. Retail outlets are assessing product movement over the holidays and will be replenishing depleted supply. Any price increase is expected to be short lived.

OUTSIDE MARKETS SUMMARY

March corn slipped 0.25 cent, closing at $4.8375. January soybeans gained 1.25 cents, closing at $13.1650, with January soybean meal down $7.20 per ton, closing at $427.20. March wheat gained 1.50 cents, ending at $6.42. February live cattle fell $2.72, ending at $112.30. February crude oil fell $0.90, closing at $47.62 per barrel. The Dow lost 383 points, ending at 30,224, while the NASDAQ fell 190, closing at 12,698.

Monday Morning Dairy Market Update - Traders Wait for Cash Direction

 Opening Calls:

Class III Milk Futures:	Mixed
Class IV Milk Futures:	Mixed
Butter Futures:	Steady to 1 Lower

Outside Market Opening Calls:

Corn Futures:	7 to 10 Higher
Soybean Futures:	25 to 30 Higher
Soybean Meal Futures:	$6 to $10 Higher
Wheat Futures:	4 to 8 Higher

Milk:

The beginning of a new year does not change the market. Fundamentals remain the same and increased demand from further financial support for food programs as appropriated on the stimulus bill is uncertain. Any increase in demand is always good, but it looks as if the increase in demand will come from increased government purchases through programs already in place and not from additional programs. Anything can happen as it did last year, and markets will react accordingly. Milk production continues to increase seasonally as it has been a mild winter so far. Cow numbers continue to increase with increasing milk production per cow. This trend is not expected to slow anytime soon. This will require increased demand to keep up with production or milk prices could decline as inventory would then build.

Cheese:

Based on how spot cheese trading closed last week, it points to increased prices Monday. Buyers have not been overly aggressive, which may be the reason milk futures have not followed suit. It seems that current buying is for rebuilding aging programs and for contracted orders. It does not seem to be in anticipation of a surge in government buying. It is too early for that. USDA has not put out any solicitations so far. Cheese output was heavy over the past few weeks as greater volumes of milk were available on the spot market at attractive prices.

Butter:

The outlook for butter is not very promising at this point. Inventory closed the year substantially higher than the previous year. Inventory may increase more rapidly now that holiday demand is finished. Churning has been active. Most plants have not reduced production to balance with demand due to heavy cream supplies are reasonable prices. Price could resume the downtrend.