Friday Morning Dairy Market Update - Optimism is Hard to Find

OPENING CALLS:

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

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	10 to 15 Higher
Soybean Futures:	30 to 45 Higher
Soybean Meal Futures:	$2 to $4 Higher
Wheat Futures:	15 to 20 Higher

MILK:

Milk futures remained under pressure Thursday due to the weakness of cheese and nonfat dry milk. Nonfat dry milk does not have any direct influence on Class III prices, but it did put pressure on Class IV futures. A better weather forecast along with a few other issues drove grain futures substantially lower Thursday with soybean making a one-day historic decline. If a top has been established in the market with lower prices from grain as the year progresses, milk production will remain strong, limiting price potential. USDA will not release the May Milk Production Thursday as I had indicated Thursday, but it will be released on Monday. Please make a note of it. Trading is expected to be light until direction is seen from spot trading.

CHEESE:

If barrel cheese declines further, it will move price back to the lowest level since April. Buyers of cheese see no reason to be aggressive and are able to increase ownership to fill orders or build supplies for later demand. This may limit price potential later in the year when demand increases seasonally.

BUTTER:

Grade A nonfat dry milk price moved to the lowest level since April 21. this put pressure on Class IV futures, resulting in double-digit losses. Butter continues to move in a sideways trading pattern. Not much is expected during spot trading Friday

Thursday Closing Dairy Market Update - Milk Futures Post Double-Digit Losses Again

MILK

Milk output and supply is fairly level with last week in many areas of the country. More milk continues to move to manufacturing as bottling demand has slowed. The recent hot weather did not seem to affect milk receipts much at many plants. Dairy farms have made great strides in cooling facilities to keep cows comfortable, lessening the impact. Spot milk in the Midwest is reported at $4-$6 under class, which is unusual for this time of year. Spot milk prices are generally at or slightly above class during this time. This shows the level of production that continues to take place. USDA will release the May Milk Production report Friday afternoon. This is expected to show milk output higher than last year. I estimate milk production to show an increase of 2.4% over the previous year with cow numbers up 4,000 head from the previous month. Grain prices took a huge hit Thursday due to positive weather forecast. Corn closed down the daily limit of 40 cents. Soybeans plummeted $1.1875 and soybean meal fell $17. These are declines we have not seen in a long time. This is possible due to the CME increasing price limits for grain a few weeks ago. Miss some rains or not get sufficient coverage and prices will increase just as dramatically.

AVERAGE CLASS III PRICES

3 Month:	$17.18
6 Month:	$17.76
9 Month:	$17.89
12 Month:	$17.88

CHEESE

Even though there has been some hot weather recently, numerous manufacturing plants report that they continue to run at full capacity. Strong cheese output leaves buyers of cheese unaggressive as was seen Thursday during spot trading. Buyers see no tightness developing in the market anytime soon. At the same time, sellers continue to offer cheese to the spot market to minimize supply build. The recent weakness of barrels has been a surprise. Price is now down to the level it was on May 28. A move below this will put it back to a price last seen in April.

BUTTER

The market continues to hold steady. Supply of cream is readily available, keeping churns active. This allows for both international and domestic demand to be easily supplied. Butter inventory is reported to be building as plants want to make sure they have sufficient supply on hand for later demand. Retail demand has slowed with the increase in demand from the food service industry.

OUTSIDE MARKETS SUMMARY

July corn plummeted 40 cents, closing at $6.33. July soybeans plummeted $1.1875, closing at $13.2975, with July soybean meal falling $17.70 per ton, closing at $361.50. July wheat fell 23.75 cents, ending at $6.39. June live cattle fell $2.20, closing at $120.20. July crude oil declined $1.11, ending at $71.04 per barrel. The Dow lost 210 points, closing at 33,823, while the NASDAQ gained 122 points, ending at 14,161.

Thursday Midday Dairy Market Summary - Cheese Prices Decline Further

 Block cheese price declined 2 cents, ending at $1.49 with one load traded. Barrel cheese price fell 6.50 cents with five loads traded. This is certainly not good for the market. Barrels fell to the previous low of May 28. If it falls below this level, it will move to the lowest level since April 6. There were only uncovered offers remaining at the close with two for blocks and one for barrels. Surprisingly, Class III futures are not hit as hard as would be anticipated. Contracts are 3 to 21 cents lower. Only front-month June shows a gain of 9 cents as it adjusts to the weekly AMS prices. Butter price remained steady at $1.8050 with no loads traded. Grade A nonfat dry milk price declined 1.50 cents, closing at $1.15 with four loads traded. Dry whey price remained unchanged at 59.25 cents with no loads traded. Class IV futures are 18 cents lower. Butter futures are 1.00 to 1.90 cents lower. Dry whey futures are 0.023 cent lower to 0.007 cent higher. Corn futures are 38 cents lower with soybeans down 81 cents and soybean meal down over $10.00 per ton.