Monday Closing Dairy Market Update - Milk Futures Slip

MILK

Milk futures had an uneventful day. Underlying cash prices did little to get traders excited. The decline of barrel cheese price was about as disappointing as the butter price on Friday. However, the weakness of barrels did not have a devastating impact on milk futures. Futures were unchanged with losses confined to single digits. There is an underlying belief that milk prices will remain high due to strong grain prices. Even if there is weakness of underlying cash, milk futures might see only minimal losses as the bias is to the upside. Current strong milk production, which has many plants running at capacity, is not bearish to the market at the present time. The anticipation is that demand will increase, and milk production will decrease as the year moves forward. Cheese inventory is increasing, but not to the extent that it is placing substantial pressure on the market. Spring flush is taking place in much of the country, and so far, there are no reports of milk being dumped. USDA will release the March Dairy Products report Tuesday. The Global Dairy Trade auction will also take place Tuesday. Corn planting is 46% complete compared to 48% last year and a five-year average of 36%. Soybean planting is 24% complete compared to 21% a year ago and a five-year average of 11%.

AVERAGE CLASS III PRICES

3 Month:	$18.82
6 Month:	$19.23
9 Month:	$19.09
12 Month:	$18.82

CHEESE

Buyers and sellers seem to be comfortable doing business at the current price level. Buyers are exercising caution as they are not convinced prices are going to escalate and do not want to be holding any more inventory than they need to at the present time. Sellers are willing to let go of product and unwilling to hold any extra inventory than they need to. Thus, the market is somewhat balanced. The Dairy Products report is expected to show increased production of cheese for March.

BUTTER

Price seems to be slowly trending lower after reaching a top in April. Demand from the foodservice industry remains strong and is expected to remain strong as well as potentially increase. There is an indication inventory is increasing again at a greater pace than it did in March. If that is the case, then the price may have reached a top for a period of time.

OUTSIDE MARKETS SUMMARY

May corn declined 6 cents, closing at $7.34. May soybeans declined 10.75 cents, closing at $15.6925, with May soybean meal down $9.80 per ton, closing at $416.20. May wheat fell 14 cents, ending at $7.2850. June live cattle fell $1.47, ending at $115.10. June crude oil gained $0.72, closing at $64.50 per barrel. The Dow increased 238 points, closing at 34,113, while the NASDAQ declined 678 points, closing at 13,895.

Monday Midday Dairy Market Summary - Barrel Cheese Slips

Spot cheese trading was looked forward to with excitement as well as apprehension based on Friday's trading activity. Not much happened which has kept milk futures mixed. Block cheese price remained unchanged at $1.80 with 2 loads traded. Barrel cheese price declined 2.25 cents closing at $1.8125 with one load traded. Butter price remained unchanged at $1.7525 with no loads traded. Grade A nonfat dry milk price slipped 0.50 cent closing at $1.32 with one load traded. Dry whey price remained unchanged at 66 cents with no loads traded. There is concern cheese and butter prices have topped. However, that does not indicate that the market will be falling apart. It does mean that prices may move sideways to lower over the coming weeks. Class III futures range from 25 cents lower to 12 cents higher. Class IV futures have not yet traded. Butter futures are 0.50 cent to 1.50 cents lower. Dry whey futures are 1.20 cents higher.

Monday Morning Dairy Market Update - Mixed Trading Expected Before Cash

 OPENING CALLS:

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

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	8 to 15 Higher
Soybean Futures:	10 to 20 Higher
Soybean Meal Futures:	Steady to $2 Lower
Wheat Futures:	5 to 10 Higher

MILK:

Milk futures closed higher last week with June and July futures nearing $20.00. The same might hold true for this week if underlying cash prices can hold. Strong demand is being met with increasing milk production. The demand for replacements is high, indicating there is little interest in reducing cow numbers. Increasing milk production will be ongoing for another month or more depending on weather. Increasing feed prices are a concern but may not have much of an impact for the time being. That will become a greater concern down the road if the growing season has some difficulties and crop conditions deteriorate. For right now, there is hope sufficient acres will be planted and grain supplies will be maintained or increased. The daily trading limit for grain futures has been expanded beginning Monday, which could result in greater volatility through the growing season.

CHEESE:

Block cheese price continues to maintain its sideways pattern with price at the same level it was in mid-March. It is unlikely cheese prices will fall back very much unless there is some outside force that would have a significant impact. Higher grain prices and strong demand should keep prices supported. The question is whether there will be much upside potential over the next few weeks or even months. Farmers are pushing milk production, leaving plenty available for demand.

BUTTER:

Price has been struggling since its high on April 12. It seems that the food service pipeline has been filled with demand settling down to maintaining supply. There is indication more butter is moving to inventory again. However, greater cream demand for ice cream production is reducing the abundant supply that has been available for butter production. This should temper some of the growth of inventory.