Wednesday Closing Dairy Market Update - April Income Over Feed Reaches $12.29

MILK

There is a strong correlation between corn and milk prices, but it is not an immediate correlation. Corn prices have fallen significantly over the past two days, but it has not had any spillover effect. If corn prices continue to trend lower reducing the cost of feed, it may eventually have an impact. Milk futures were higher today following the minor increases of underlying cash. The Federal Order prices will be released tomorrow for the month of May. Traders anticipate a Class III price of $25.20 and a Class IV price of $25.07. Class III will be a new record and may be the high for the year if the market continues along the current course. The June futures contract will take over as the front month tomorrow. The Farm Service Agency released the average soybean meal price for April used in the calculation of income over feed for the Dairy Margin Coverage program. The soybean meal price was $476.70 per ton, a decrease of $17.28 per ton from March, but $63.07 per ton higher than a year ago. This put the income over feed at $12.29 and the highest since July 2020. There will be no Dairy Margin Coverage payment.

AVERAGE CLASS III PRICES

3 Month:	$24.53
6 Month:	$24.31
9 Month:	$23.66
12 Month:	$23.01

CHEESE

Cheese demand is termed as mixed this week. Some varieties may be seeing slower demand due to time of year and price. Other varieties are seeing steady sales. Dairy Market News reports that cheddar producers are seeing inventory building a little more rapidly than earlier in the year. That may be the reason American cheese inventory grew in April after decreasing the previous three months. Curd and process cheese demand remains strong.

BUTTER

Butter output has slowed somewhat for various reasons. There is sufficient cream available. Some plants are scheduling some downtime for maintenance. Some are having difficulty finding sufficient workers to keep plants running at full capacity. The market is not tight but remains supported as buyers continue to look ahead with their purchases.

OUTSIDE MARKETS SUMMARY

July corn fell 22.25 cents closing at $7.3125. July soybeans gained 7 cents closing at $16.9025 with July soybean meal down $2.10 per ton closing at $412.70. July wheat fell 46.25 cents ending at $10.4125. June live cattle jumped $2.27 closing at $132.80. July crude oil increased $0.59 closing at $115.26 per barrel. The DOW declined 177 points closing at 32,813 while the NASDAQ declined 87 points closing at 11,994.

Wednesday Midday Dairy Market Summary - Milk Futures Hold Gains

OUTSIDE MARKETS SUMMARY:

CORN:	24 Lower
SOYBEANS:	7 Higher
SOYBEAN MEAL:	$0.80 Higher
LIVE CATTLE:	$2.12 Higher
DOW JONES:	195 Points Lower
NASDAQ:	95 Points Lower
CRUDE OIL:	$1.89 Higher

MIDDAY MARKET UPDATE:

Block cheese price remained unchanged at $2.2475 with no loads traded. Barrel cheese price increased 0.75 cent, closing at $2.3025 with no loads traded. There was an unfilled bid for a load of blocks and an uncovered offer for a load of barrels. Dry whey price increased 2.75 cents, closing at 55 cents with no loads traded. There were five unfilled bids and two uncovered offers remaining at the close. Butter price increased a penny, ending at $2.89 with five loads traded. Grade A nonfat dry milk price increased 0.25 cent closing at $1.8675 with six loads traded. Class III futures are 10 cents lower to 32 cents higher. June shows the only loss while the double-digit strength is taking place in 2023 contracts on light trade. Class IV futures are 2 cents lower to 26 cents higher with strength being in 2023 contracts. Butter futures are 0.50 cent lower to 1.05 cents higher. Dry whey futures are 0.40 to 1.30 cents higher. I failed to consider the impact of the holiday on Monday on the announcement of the Federal Order class prices in my commentary Tuesday. (Editor's note: I failed also.) Wednesday is the final day to trade May futures and options with the May Federal Order class prices announced Thursday.

Wednesday Morning Dairy Market Update - Cheese Prices to Influence Futures

OPENING CALLS:

Class III Milk Futures:	Mixed
Class IV Milk Futures:	Steady to 5 Higher
Butter Futures:	Steady to 2 Higher

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	1 to 2 Lower
Soybean Futures:	5 to 8 Higher
Soybean Meal Futures:	$3 to $4 Higher
Wheat Futures:	4 to 6 Higher

MILK:

Even with the recent price strength in Class III futures, the market remains entrenched in a sideways price pattern. Underlying cash is not moving very much and, in fact, has decreased to the lowest level it has been in the last two months. Class IV futures have been moving higher with new contract highs established again Tuesday. The premium of Class IV futures over Class III is widening. The Farm Service Agency still has not released the average soybean meal price used in the calculation of income over feed for the month of April. This is likely due to Monday being a holiday. This should be released Wednesday.

CHEESE:

Traders are uncertain over the movement of cheese prices. Further weakness of blocks Tuesday was a surprise as traders seemed to discount the negative influence, feeling it was temporary. The concern is that this weakness is a continuation of the weakness of last week. If it continues Wednesday, selling could erupt in futures as liquidation may surface. Demand has been good but may be slowing slightly.

BUTTER:

Price may find some stability here as reduced butter output may keep supply from building. Demand is good through the food service industry but has slowed a little for retail. Inventory continues to remain significantly below the level of a year ago. Price is expected to be choppy.