Friday Closing Dairy Market Update - Cattle Slaughter Falls

MILK

Milk futures put in a positive week, closing higher than the end of last week. What is interesting about it is that Class III futures were not really supported by underlying cash. However, Class IV futures were, due to strong gains of underlying cash. This may not make sense unless you understand that cheese and dry whey drive the Class III price with a little help from butter. Butter and nonfat dry milk are the drivers of Class IV milk. More schools will be winding down next week, continuing to move more milk to manufacturing. This will not overwhelm the market as milk production is currently below year-ago levels. Where it could be overwhelming would be due to the lack of a full workforce in many plants limiting the amount of milk they can process. This has been an ongoing issue. The result of this may be an increase in the amount of milk that might be offered on the spot market. Dairy cattle slaughter for the month of April totaled 237,800 head, a decrease of 59,400 head from March and a decrease of 19,700 head from April 2021. In fact, this is the largest decrease in slaughter from March to April going back through 1994 when I began tracking the numbers. The second-largest decline was in 2000 with a decrease of 57,000 head. This is the smallest monthly slaughter since June 2021.

AVERAGE CLASS III PRICES

3 Month:	$24.74
6 Month:	$24.29
9 Month:	$23.68
12 Month:	$22.91

CHEESE

For the week, blocks increased 7.25 cents will six loads traded. Barrels declined 4.75 cents with 21 loads traded. Dry whey declined 2.50 cents with 21 loads traded. The increase of block cheese price was offset by the decrease of both barrels and dry whey, which, in theory, should have left the market neutral with little change from last week in Class III futures. However, the focus of traders was the fact that block cheese increased and held throughout the week.

BUTTER

For the week, butter increased 14.50 cents with 37 loads traded. Grade A nonfat dry milk increased 7 cents with six loads traded. Price ended the week just shy of the level reached on Feb. 15. Price is heading toward the highest price of the year set on Jan. 21 at $2.9350, 8.50 cents higher than the close Friday. Price has increased five consecutive days and may be due for a price correction soon.

OUTSIDE MARKETS SUMMARY

July corn declined 4.50 cents, closing at $7.7875. July soybeans gained 14.75 cents, closing at $17.0525, with July soybean meal gaining $4.60 per ton, closing at $429.90. July wheat fell 31.75 cents, ending at $11.6875. June live cattle closed $0.07 higher at $131.57. July crude oil gained $0.39, closing at $110.28. The Dow gained 9 points, closing at 31,262, while the NASDAQ declined 34 points, closing at 11,355.

Friday Midday Dairy Market Summary - Barrels Fall Further

OUTSIDE MARKETS SUMMARY:

CORN:	6 Lower
SOYBEANS:	17 Higher
SOYBEAN MEAL:	$4.80 Higher
LIVE CATTLE:	$0.02 Lower
DOW JONES:	596 Points Lower
NASDAQ:	341 Points Lower
CRUDE OIL:	$0.42 Lower

MIDDAY MARKET UPDATE:

Block cheese price remained steady at $2.38 with no loads traded. An offer was placed above the market and lowered to the closing price without a buyer showing up. Barrel cheese price moved steadily lower, closing down 5.25 cents, ending at $2.3475 with five loads traded. Dry whey price increased 0.75 cent, ending at 50.75 cents with two loads traded. Class III futures could not shrug off the weakness of barrels as they did Thursday, succumbing to the pressure Friday. Futures are still overpriced based on the calculation of the past two days as contracts really should not have increased Thursday with further weakness again Friday. Futures through the end of the year are 36 cents lower to 7 cents higher. Contracts in 2023 are mixed. Butter price increased 2.25 cents, closing at $2.85 with eight loads traded. Grade A nonfat dry milk price increased a penny, closing at $1.80 with one load traded. Class IV futures are steady to 25 cents higher. Butter futures are 0.27 cent lower to 4.00 cents higher. Dry whey futures are steady to 0.75 cent higher.

Friday Morning Dairy Market Update - Class III Futures May Correct

OPENING CALLS:

Class III Milk Futures:	Steady to 5 Lower
Class IV Milk Futures:	Mixed
Butter Futures:	Steady to 1 Higher

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	5 to 7 Lower
Soybean Futures:	Mixed
Soybean Meal Futures:	$1 to $3 Lower
Wheat Futures:	10 to 14 Lower

MILK:

Class III milk futures had an impressive day Thursday despite the decline of the class price calculation due to the weakness of barrel cheese and dry whey. The strength stemmed from the April Milk Production report showing a decrease in milk production of 1% from a year ago. If this weakness were to continue, it is possible milk supply could tighten later this year when demand increases seasonally. However, the other side of the equation is the rising concern over a looming recession and what that could mean for demand. Milk futures might stabilize or even retrace a bit until spot trading provides further direction Friday. Due to the significant increase of Class III futures Thursday, higher cheese price could be met with lower futures as futures were overdone to the upside. Class IV futures should remain supported.

CHEESE:

Cheese prices are not expected to fall apart anytime soon, but there may be some price fluctuations as the summer progresses. However, the concern will be for demand if fuel price remains high and the economy moves into a recession. There is a strong possibility this may happen, and it will have an impact on the market.

BUTTER:

Price is pushing higher as buyers want to increase ownership of supply for later in the year. This may temper a bit as buyers assess the possibility of a recession. USDA will release the April Cold Storage report on Monday, showing whether butter stocks continued to increase during the month.