Monday Closing Dairy Market Update - Milk Futures Higher Across the Board

MILK

Milk futures were higher across the board Monday with Class III displaying much volatility, while Class IV steadily moved to new highs. December Class IV futures closed at $19, marking a milestone for Class IV after a long period of much lower prices. Class IV prices are now generally above Class III prices. It has not been this way for quite some time. Class III futures showed quite a bit of volatility as traders pushed November and December futures more than 50 cents higher prior to spot trading. Contracts then fell back near unchanged before coming back to close moderately higher. Hope is being held out that blocks holding steady may mean that price has found support. It is uncertain yet whether culling has slowed recently due to the recent strength and the change in perception of traders or whether higher feed costs and the cost of goods and services will continue to show heavy culling. Demand for fluid milk remains steady, while demand from manufacturing is increasing. Hopefully, buyers will need to be aggressive in the spot market as orders are placed and end users want to gain more ownership of supply to be able to fill orders in a timely manner.

AVERAGE CLASS III PRICES

3 Month:	$18.38
6 Month:	$18.47
9 Month:	$18.48
12 Month:	$18.48

CHEESE

The weakness of barrel cheese was somewhat unexpected Monday, but it did move the inverted block-barrel spread closer together. The fact that there was no trading done in barrels with offers remaining at the close does not bode well for Tuesday. Of course, this decline could bring buyers back into the market more aggressively to take advantage of the price decline to pick up product. However, the current supply of cheese is sufficient for demand with no fear of tightening supply.

BUTTER

Price moved a penny closer to the $2 target price with only 5 cents to go before it reaches that level. Current support under the market would suggest that level will be reached sooner rather than later. Tighter cream supply and higher prices for available cream has reduced some of the output as many plants do not want to pay the higher price and would rather reduce production. Reducing production also reduces the burden put on plants that are short-staffed.

OUTSIDE MARKETS SUMMARY

December corn jumped 10.75 cents, closing at $5.79. November soybeans gained a penny, closing at $12.3675, with December soybean meal down $3.50 per ton, closing at $329.10. December wheat jumped 24.50 cents, closing at $7.9725. December live cattle declined $0.42, closing at $128.85. December crude oil gained 48 cents, ending at $84.05 per barrel. The Dow gained 94 points, closing at 35,914, while the NASDAQ gained 98 points, closing at 15,596.

Monday Midday Dairy Market Summary - Barrels Move Lower

Block cheese price held steady at $1.6750 with one load traded. There were no unfilled bids remaining at the close with two offers posted. Barrel cheese prices was hit hard with price falling 6.75 cents, closing at $1.7525, with no loads traded. There were two offers remaining at the close, potentially indicating further weakness. Dry whey price remained unchanged at 63 cents with no loads traded. Butter price increased a penny, closing at $1.95 with six loads traded. Grade A nonfat dry milk price slipped 0.25 cent, closing at $1.5550 with four loads traded. Class III futures are mixed after initially showing significant gains of over 50 cents in November and December contracts prior to spot trading. Class IV futures are unchanged to 18 cents higher. Butter futures are 1 cent lower to 1.75 cents higher. Dry whey futures are 0.57 cent lower to 1.47 cents higher.

Monday Morning Dairy Market Update - Mixed Price Activity Expected

OPENING CALLS:

Class III Milk Futures:	Mixed
Class IV Milk Futures:	Mixed
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	Mixed
Soybean Futures:	4 to 6 Lower
Soybean Meal Futures:	$2 to $3 Lower
Wheat Futures:	6 to 10 Higher

MILK:

The substantial pressure of last week on Class III futures may subside but may not reverse any time soon unless cash cheese finds support. The October contract will cease trading on Tuesday with the Federal Order prices announced Wednesday. About half of the November contract is priced still allowing for substantial volatility, but that volatility will dimmish somewhat each day over the next two weeks. Overnight trade only showed activity in the November Class III contract with bids and offers placed and not too far apart. However, traders were unwilling to move those levels as they exercise caution to begin the week. The CME is reducing the trading limits for grains beginning Monday. Trading limits for corn is now 35 cents, 90 cents for soybeans, $25 per ton for soybean meal and 50 cents per bushel for wheat. These are decreased for corn, soybeans and soybean meal with an increase for wheat.

CHEESE:

Cheese prices did not perform well last week with most of the pressure on blocks. Block cheese supply is more abundant as production is strong as seen by increasing cheese stocks. Some port congestion and hauling difficulties has backed up cheese into inventory at a time of year during which inventory generally decreases. Even with that, exports have been doing very well. Barrel supply is tighter resulting in the price inversion.

BUTTER:

Price is poised to reach $2.00 before the end of the year and maybe even this week as orders continue to come in. Production is being supplemented by inventory. This sufficient supply to meet demand, but the fact that inventory is below year earlier levels is certainly supportive to the market.OPENING CALLS: