Fluid Milk and Cream - Western U.S. Report 38

In California, temperatures decreased from the higher 90s during the prior week to the low     90s/80s range this week, improving cow comfort. That said, milk production is seasonally     lower, along with fat components of milk intakes. Although more favorable temperatures have     made some marginal improvements in milk production this week, some handlers' preliminary     records indicate September 2023 milk production is currently anticipated to be below last     month and September 2022. Open capacity is noted by processors. Stakeholders report tight     spot load availability. Demand is strong for Class I and III. Class II and IV demand is     steady. However, stronger Class IV demand from the confectionary manufacturing group is     reported by stakeholders. 

Temperatures in Arizona remained in triple digits, decreasing to the low 100s, keeping cow comfort unfavorable. Farm level milk output is lower. Tighter milk volumes keep some open processing capacity available. Tight spot load availability is reported by stakeholders. Class II demand from heavy whipping cream and sour cream producers is reported to be strong by some handlers. All other Class demand is unchanged. 

In New Mexico, more favorable temperatures for farming operations and cow comfort have contributed to flatter week to week decreases in milk output recently. Demand for Class I and III is strong, while Class II and IV demand is steady. 

Temperatures cooled off during the second part of the week in the Pacific Northwest. The area also received some light rain. Both contributed to improved farming operations, cow comfort and irrigation supplies for crops. Handlers report week to week differences in milk production as flat currently. Manufacturers indicate milk volumes are meeting processing needs. Demand for all Classes is unchanged. 

In the mountain states of Idaho, Utah, and Colorado farm level milk production is seasonally     lower. However, handlers note milk production and spot load availability are less tight     compared to other parts of the West region. Class I and III milk demand is strong. Class II     and IV milk demand is steady. 

Condensed skim milk and cream are tight throughout most of the region. Condensed skim milk and cream demand is strong to steady. Cream multiples moved lower on the bottom end.

     Western U.S., F.O.B. Cream
     Price Range - All Classes; $/LB Butterfat:   3.0000 - 3.6815
     Multiples Range - All Classes:               1.1000 - 1.3500
     Price Range - Class II; $/LB Butterfat:      3.2724 - 3.6815
     Multiples Range - Class II:                  1.2000 - 1.3500

Thursday Morning Dairy Market Update - Traders Uncertain of Price Strength

OPENING CALLS:

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

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	2 to 3 Lower
Soybean Futures:	13 to 15 Lower
Soybean Meal Futures:	$3 to $4 Lower
Wheat Futures:	3 to 4 Lower

MILK:

The decline of Class III milk futures has been brutal, again solidifying the adage that markets will always fall faster than they increase. Lower prices should stimulate buying interest but that has not yet taken place. Milk production was stronger during the month of August than anticipated, leaving little reason to believe milk supply will tighten anytime soon. Cow numbers remaining unchanged from the previous month does not suggest a contraction of the cow herd despite low milk prices. More, larger dairy have been struggling due to lower milk prices and tighter margins this year, but banks cannot afford to pull the financing and will work to pull them through this period of low milk prices and reduced margins. Smaller dairies have had the benefit of continued payment from the Dairy Margin Coverage program to make up for some of the difference.

CHEESE:

Cheese demand is improving overall, but that has not translated into higher prices. Cheese prices have fallen as manufacturers continue to have sufficient supplies available and are moving those to market rather than hold inventory. Buyers are holding back, seeing no need to become aggressive as long as supply is readily available.

BUTTER:

Price has had a nice increase this week, but upside potential may be limited. Buyers may reach a threshold and step back. Purchasing is being done for fourth quarter demand. Churning is active but is not keeping up with demand with inventory being used to supplement fresh supply.

Wednesday Closing Dairy Market Update - October Class I Price Set at $19.47

MILK

Further selling pressure resumed on Class III futures in reaction to losses in cheese prices. October Class III futures have lost over $2 per cwt over the past two weeks. December futures declined about $1.75. November futures tested the low today but were able to bounce. Class IV futures gained on the strength of butter and nonfat dry milk. After Class III milk futures were marked to market for the day, Class III futures showed strength, trimming some of the losses. Traders may want to cover short positions after the losses today and the steep declines recently to protect their income in case futures rebound. Milk production across the country is variable along seasonal levels. Demand for milk from all classes of milk is steady. The October Class I milk price was announced at $19.47, up $0.47 from September. The price a year ago was $22.71.

AVERAGE CLASS III PRICES

3 Month:	$17.55
6 Month:	$17.72
9 Month:	$17.88
12 Month:	$18.05

CHEESE

Cheese has basically been in a freefall primarily for barrel prices. The price has fallen 20 cents over three days. It is not an unprecedent drop but it ranks up there with the few. It is interesting that Dairy Market News reports that barrel cheese demand in the Midwest is termed steady. Supply has not increased to any extent, making it surprising since trading activity on the spot market has been as bearish as it has been. With sellers wanting to move product, buyers continue to pull back to purchase at lower prices.

BUTTER

The market is showing good strength, but there is concern that the price may not hold. The higher price is pulling more buyers off the sideline to purchase before the price moves too much higher. The price is quite a bit higher than the World price, which will continue to hinder exports. However, improving domestic demand is increasing buying interest.

OUTSIDE MARKETS SUMMARY

December corn closed up 6 cents per bushel at $4.8225, November soybeans closed up 4.50 cents at $13.2000 and December soybean meal closed up $5.90 per ton at $395.10. December Chicago wheat closed up 4.75 cents at $5.8875. December live cattle closed up $1.05 at $191.53. November crude oil is down $0.82 per barrel at $89.66. The Dow Jones Industrial Average is down 77 points at 34,441 with the NASDAQ down 209 points at 13,469.