Friday Morning Dairy Market Update - Traders Anticipate Further Strength

OPENING CALLS:

Class III Milk Futures:	10 to 15 Higher
Class IV Milk Futures:	4 to 8 Higher
Butter Futures:	1 to 2 Higher

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	2 to 3 Higher
Soybean Futures:	2 to 4 Higher
Soybean Meal Futures:	$2 to $4 Higher
Wheat Futures:	Mixed

MILK:

Milk futures have come alive this week with underlying cash providing support. Concern remains over upside price potential of cheese and butter, but recent strength suggests higher prices may be possible. Milk production is not overwhelming the market, but remains sufficient for demand. The September Milk Production report will be released on Monday, providing not only an idea of production, but cow numbers and production per cow. This may determine whether milk prices will hold stronger next year. Class III futures traded higher overnight with good volume. Traders seem confident cheese prices may increase. There was a trade in March Class IV futures at 3 cents lower. It is unusual to see trading activity in Class IV futures overnight.

CHEESE:

The unfilled bids at the close of spot trading Thursday suggest cheese prices may increase further Friday. Buyers have turned more aggressive, but that may be limited unless demand improves, reducing inventory at an increased pace. The increased demand for barrels has pushed the barrel price above blocks again.

BUTTER:

The butter price has increased this week but the volume of loads that have been traded will go a long way to satisfy demand. This may leave the upside price potential limited. The strong churning pace and plentiful cream supply is keeping plants busy and running at capacity.

Thursday Closing Dairy Market Update - Traders Have Turned Optimistic

MILK

November and December Class III futures moved near the mid-$21.00 range after falling back from that level on Friday. There is a strong potential for further gains on Friday as there were quite a few unfilled bids that remained at the close of spot trading for butter and barrel cheese. At the worst, the market may move in a sideways pattern for a time. More aggressive buying interest in cheese and butter would further support milk futures. However, traders will be cautious as the upside price potential may be limited due to available supplies. California continues to struggle with increasing cases of bird flu in dairy cattle. It is uncertain how the impact it will have on milk supply and milk prices. High temperatures are likely to have a greater impact on milk production. The cattle infected with bird flu may have a greater risk of dying due to the flu virus combined with the hot weather. The virus itself usually does not kill the cows.

AVERAGE CLASS III PRICES

3 Month:	$21.88
6 Month:	$21.10
9 Month:	$20.56
12 Month:	$20.28

CHEESE

Some reports indicate retail demand is improving but not enough to generate any real excitement over supplies. Cheese demand should improve but cheese availability may keep prices from moving much higher unless both production and supplies tighten. The strong increase in the barrel cheese price today and the number of unfilled bids remaining at the close suggests further upside potential for the barrel price on Friday. The hope is for blocks to follow barrels providing support to the market.

BUTTER

It is a testament to good demand that the butter price has increased in the past two days despite the heavy volume of butter offered on the spot market. Butter manufacturing is strong with plentiful cream supplies. The cold storage report next week is expected to show significantly higher inventory than a year ago. The upside potential of the butter price may be limited.

OUTSIDE MARKETS SUMMARY

December corn closed up 2.00 cents per bushel at $4.0675, November soybeans closed up 8.75 cents at $9.8875 and December soybean meal closed up $4.40 per ton at $318.10. December Chicago wheat closed up 4.50 cents at $5.8950. December live cattle closed down $0.43 at $186.18. November crude oil is up $0.32 per barrel at $70.71. The Dow Jones Industrial Average is up 161 points at 43,239 with the NASDAQ up 7 points at 18,374.

Thursday Midday Dairy Market Summary - Butter Sales Remain Heavy

OUTSIDE MARKETS SUMMARY:

CORN:	1 Higher
SOYBEANS:	8 Higher
SOYBEAN MEAL:	$4.60 Higher
LIVE CATTLE:	$0.32 Lower
DOW JONES:	203 Points Higher
NASDAQ:	109 Points Higher
CRUDE OIL:	$0.07 Lower

MIDDAY MARKET UPDATE:

The block cheese price declined 1.75 cents closing at $1.9250 with four loads traded. The barrel cheese price gained 8 cents closing at $2.01 with one load traded. There were no unfilled bids or uncovered offers remaining for blocks with three unfilled bids for barrels remaining. This may indicate further strength in barrels as buyers become more aggressive. The dry whey price remained unchanged at 59.50 cents with no loads traded. Class III futures are 2 cents lower to 35 cents higher. The butter price gained 4.50 cents closing at $2.68 with 33 loads traded. There were 15 unfilled bids and two uncovered offers remaining at the close. There have been 160 loads traded so far this week. Grade A nonfat dry milk gained a penny closing at $1.36 with one load traded. Class IV futures are 7 to 20 cents higher. Butter futures are 0.25 cent lower to 3.47 cents higher. Dry whey futures are 0.22 cent lower to 0.45 cent higher.