Friday Closing Dairy Market Update - Milk Futures Post a Minor Bounce

MILK

The bounce of Class III milk futures did not change the weakness and direction of the market. The strength of futures was not fundamental, but the decision of traders to liquidate into the weekend in case fundamentals change and the markets become stronger next week. There was little sign of a change in market fundamentals. Milk futures were higher ahead of spot cheese trading as traders decided to take profits ahead of cash. The block cheese price bounced from the lows but still closed lower. This action did not garner much interest from traders as they expect the market to remain choppy. The average soybean meal price for September has not yet been posted. This is the final price needed to calculate the income over feed for the Dairy Margin Coverage program, The income over feed price for August was $13.72 and the September price is expected to be higher when looking at the average corn, premium/supreme hay, and the All-milk price. USDA will release the September Dairy Products report on Monday.

AVERAGE CLASS III PRICES

3 Month:	$19.88
6 Month:	$19.74
9 Month:	$19.62
12 Month:	$19.60

CHEESE

For the week, blocks declined by 6.25 cents with 12 loads traded. Barrels slipped 0.25 cent with four loads traded. Dry whey remained unchanged with four loads traded. Cash activity decreased substantially from previous weeks. Buyers are purchasing on an as-needed basis as they may have sufficient supplies purchased ahead. Buyers are comfortable with supplies and remain unaggressive. Manufacturers are moving supply to the market to keep inventory from building.

BUTTER

For the week, butter declined by 2.50 cents with nine loads traded. Buyers have already purchased a substantial supply for expected demand through the end of the year. Any increase in demand will be easily met with inventory. Grade A nonfat dry milk increased by 0.25 cent this week with 34 loads traded. That much trading activity and a minor price move indicate a balanced market. Butter production in September is expected to be larger than a year ago on the Dairy Products report.

OUTSIDE MARKETS SUMMARY

December corn closed up 3.75 cents per bushel at $4.1450, January soybeans closed down 0.75 cent at $9.9375 and December soybean meal closed down $4.20 per ton at $295.30. December Chicago wheat closed down 2.50 cents at $5.6800. December live cattle closed down $0.38 at $185.93. December crude oil is up $0.23 per barrel at $69.49. The Dow Jones Industrial Average is up 289 points at 42,052 with the NASDAQ up 145 points at 18,240.

Friday Midday Dairy Market Summary - Block Cheese Bounces From the Low

OUTSIDE MARKETS SUMMARY:

CORN:	3 Higher
SOYBEANS:	1 Lower
SOYBEAN MEAL:	$4.60 Lower
LIVE CATTLE:	$0.42 Lower
DOW JONES:	335 Points Higher
NASDAQ:	177 Points Higher
CRUDE OIL:	$0.40 Higher

MIDDAY MARKET UPDATE:

The block cheese price declined by 0.25 cent closing at $1.8375 with four loads traded. The price initially declined to $1.8050 before buying interest brought it off the lows. The barrel cheese price gained 0.75 cent closing at $1.8675 with one load traded. The dry whey price remained unchanged at 60.50 with one load traded. Class III futures are steady to 19 cents higher. The butter price declined 3.75 cents closing at $2.67 with no loads traded. No buyers showed up to do any business during spot trading. Nonfat dry milk remained steady at $1.3775 with no loads traded. Class IV futures are steady to 7 cents higher. Butter futures are 0.77 -- 2.27 cents lower. Dry whey futures are 0.25 cent lower to 0.95 cent higher.

Friday Morning Dairy Market Update - Milk Futures May Bounce

OPENING CALLS:

Class III Milk Futures:	5 to 15 Higher
Class IV Milk Futures:	Mixed
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	1 to 2 Higher
Soybean Futures:	6 to 7 Higher
Soybean Meal Futures:	Mixed
Wheat Futures:	2 to 4 Higher

MILK:

Class III milk futures have taken a beating over the past two weeks as the underlying cash prices have declined. It had been anticipated that milk production would remain below a year ago and the decline would increase as time progresses. However, that has not been the case as milk per cow has improved and culling has slowed substantially. Farms are capitalizing on the demand for beef-on-dairy calves. This reduces the need to cull cows as aggressively for cash flow. Reduced feed prices allow lower producing cows to remain in the herd and pay for themselves. Milk futures may see some strength to end the week as traders may liquidate some of their short positions in case underlying cash prices bounce.

CHEESE:

Buyers could take advantage of the lower prices to purchase cheese for fill-in orders and replenish aging programs. Cheese demand is variable and likely variety specific. Some plants have much of their production already spoken for and are keeping up with demand. Others see slower demand than anticipated for this time of year. They are trying to move cheese to the market to limit increasing plant inventory.

BUTTER:

The butter price has increased in the past few days, but upside potential is expected to be limited. Churning is active with cream readily available. Butter inventory is expected to end the year higher than last year. This may keep the price in a range for an extended period.