Wednesday Morning Dairy Market Update - Traders Show Caution Over Further Price Strength

OPENING CALLS:

Class III Milk Futures:	4 to 8 Lower
Class IV Milk Futures:	Mixed
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	Steady to 1 Higher
Soybean Futures:	8 to 10 Lower
Soybean Meal Futures:	$2 to $3 Lower
Wheat Futures:	1 to 3 Higher

MILK:

Class III futures showed some selling pressure overnight as traders opted to take some quick profits from the market rather than guessing whether the underlying cash prices would remain supported. The current fundamentals do not suggest continued price strength for a long duration. There is no shortage of milk, but milk is not overwhelming the market. Spot milk prices are holding well for this time of year. The next few weeks may see lower spot prices as more milk will be available for processing due to schools being closed. However, manufacturing plants will absorb the extra milk without difficulty. Milk production in November is expected to have been higher than the previous year. The Milk Production report on Thursday will show the level of output for the month.

CHEESE:

The block cheese prices have increased nicely over the past two weeks, but may soon run out of strength. Once buyers have covered their current needs, there may be little interest in supporting the market at these levels. Prices are not expected to fall apart but will find a level that might increase demand.

BUTTER:

Butter is of greater concern than cheese. Inventory is higher than a year ago with some reports indicating inventory is currently increasing. This would be earlier than usual, but not unexpected due to abundant cream supplies keeping churns running on full schedules. The price is expected to revisit the recent lows before the end of the year.

Tuesday Closing Dairy Market Update - Most Milk Futures Contracts Show Losses

MILK:

Traders hesitated over buying milk futures aggressively as the recent increases may increase the selling interest of traders in the spot market. Holiday orders have been completed, reducing the need for buyers of cheese and butter to purchase to fill orders. It is too early for buyers to purchase ahead for next year as they do not want to build and pay for inventory this much in advance. Milk production is sufficient for demand. Bottling for school accounts has slowed with milk being diverted to manufacturing. Manufacturing plants will absorb the extra milk without difficulty. The bird flu had been anticipated to impact milk production significantly but has not tightened the market to the extent that there is a shortage of milk. The tight heifer supply was expected to reduce cow numbers and tighten the milk supply, but that has not had the impact it was thought to have. USDA will release the November Milk Production report on Thursday which will show us cow numbers, production per cow, and milk production for the month.

AVERAGE CLASS III PRICES:

3 Month:	$19.67
6 Month:	$19.62
9 Month:	$19.39
12 Month:	$19.23

CHEESE:

Block cheese has remained steady or increased for eight consecutive days with the price moving back to the highest level since October 30. The barrel cheese price has not followed the same pattern with consecutive price increases in the past two days. The price is back to the highest level since November 7. Traders are cautious over the upside price potential as holiday demand has been filled and supply is sufficient for fill-in orders and satisfy regular demand.

BUTTER:

There have been some reports that butter inventory is increasing. Demand has been good, but production has been strong due to the heavy cream supplies. Increased amounts of cream have been utilized for other holiday Class II products, alleviating some of the cream available for butter manufacturing. However, more will be available after the holidays keeping churns running at capacity and supply readily available to the market.

OUTSIDE MARKETS SUMMARY:

March corn closed down 1.50 cents per bushel at $4.4350, January soybeans closed down 5.25 cents at $9.7675 and January soybean meal closed up $.30 per ton at $287.20. March Chicago wheat closed down 5.00 cents at $5.4500. February live cattle closed down $0.23 at $189.75. January crude oil is down $0.63 per barrel at $70.08. The Dow Jones Industrial Average is down 268 points at 43,450 with the NASDAQ down 65 points at 20,109.

Tuesday Midday Dairy Market Summary - Milk Futures Show Weakness Despite Higher Cash

OUTSIDE MARKETS SUMMARY:

CORN:	3 Lower
SOYBEANS:	7 Lower
SOYBEAN MEAL:	$0.20 Higher
LIVE CATTLE:	$0.15 Higher
DOW JONES:	340 Points Lower
NASDAQ:	68 Points Lower
CRUDE OIL:	$0.96 Lower

MIDDAY MARKET UPDATE:

The block cheese price increased 3.75 cents closing at $2.52 with seven loads traded. The barrel cheese price increased by 5.50 cents closing at $1.7850 with four loads traded. There was an unfilled bid for a load of blocks and three uncovered offers remaining for barrels at the close. The dry whey price remained unchanged at 74.50 cents with no loads traded. Class III futures are mixed from 25 cents lower to 15 cents higher. Futures showed weakness after spot trading rather than following spot prices higher. The butter price increased 2 cents closing at $2.52 with one load traded. There was an unfilled bid and three uncovered offers remaining at the close. Nonfat dry milk increased 0.25 cent closing at $1.38 with one load traded. Class IV futures are mixed, ranging from 10 cents lower to 8 cents higher. Butter futures are 0.20 -- 1.65 cents higher. Dry whey futures are 0.50 cent lower to 0.75 cent higher.