Tuesday Morning Dairy Market Update - Mixed Futures Ahead of Cash

OPENING CALLS:

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

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	3 to 4 Higher
Soybean Futures:	1 to 2 Higher
Soybean Meal Futures:	Steady to $1 Higher
Wheat Futures:	7 to 9 Higher

MILK:

The weakness in Class III milk futures on Monday was confined to the nearby months. The increase in cash prices during the spring flush lends itself to the idea that strength during increasing milk production may indicate further strength when milk production declines during the summer. Of course, it will be up to demand to dictate how high prices will move. More milk is moving to manufacturing and may add to inventory near term. There are reports that retail demand is improving, which may support cash prices, but supply may limit upside potential. The spring flush is past in some areas, while others continue to experience production increases. The potential for higher milk prices should maintain cow numbers as producers want to keep the stalls full. The Global Dairy Trade auction takes place Tuesday.

CHEESE:

The weakness in cheese on Monday may indicate that recent buyers have satisfied their needs. This may reduce the anxiety that brought more buyers into the market due to the consistent price increases. Buyers may hold back to see how aggressive sellers will be. Increasing cheese production may increase the desire for plants to sell aggressively to limit inventory.

BUTTER:

The butter price remains in a range with limited volatility. The buyers and sellers are comfortable with the current price. There is little reason for them to be concerned about an oversupply or a deficit of supply. Cream is readily available, keeping churns busy despite higher demand from ice cream and other Class II manufacturers.

Monday Closing Dairy Market Update - Class III Milk Futures Closed Mixed

MILK:

Traders seemed to throw caution to the wind to begin the week, even though the end of last week closed with caution. Early buying was quickly reversed once underlying cash cheese prices showed weakness. Milk prices look much more promising than earlier this year. The better outlook will keep milk production strong as farmers will continue to push milk production on the idea that prices will only get better as the year progresses. Cows will remain in the herds as stalls will be kept full. Those who want to purchase replacements will purchase them on the idea that strengthening milk prices during spring flush may mean higher prices later in the year as demand improves. Beef cattle prices remain high and are expected to remain that way for some time to come. This will keep beef-on-dairy a popular choice for breeding a significant percentage of the herd, leaving heifer supplies tight and prices high.

AVERAGE CLASS III PRICES:

3 Month:	$18.82
6 Month:	$18.96
9 Month:	$18.80
12 Month:	$18.62

CHEESE:

The weakness in the spot cheese today may result in further weakness on Tuesday, as buyers may have reached their threshold. Sellers may want to sell as much as possible before prices decline, adding to the weakness. However, the market is not expected to fall apart as buyers will step in more aggressively on price weakness.

BUTTER:

Retail butter demand is improving, but whether it will be enough to cause the price to break out of the range anytime soon is anyone's guess. However, exports are expected to remain strong as the U.S. price is very competitive in the world market. Butter price would be lower than it is if it were not for strong exports.

OUTSIDE MARKETS SUMMARY:

July corn closed up 4.00 cents per bushel at $4.4750, July soybeans closed up .75 cent at $10.5075 and July soybean meal closed down $.80 per ton at $291.10. July Chicago wheat closed up 4.00 cents at $5.2900. June live cattle closed up $0.75 at $212.98. July crude oil is up $0.16 per barrel at $62.13. The Dow Jones Industrial Average is up 137 points at 42,792, with the NASDAQ up 4 points at 19,215.

Monday Midday Dairy Market Summary - Cheese Falls Back

OUTSIDE MARKETS SUMMARY:

CORN:	1 Higher
SOYBEANS:	Unchanged
SOYBEAN MEAL:	$0.60 Lower
LIVE CATTLE:	$0.72 Higher
DOW JONES:	167 Points Higher
NASDAQ:	6 Points Higher
CRUDE OIL:	$0.35 Higher

MIDDAY MARKET UPDATE:

The block cheese price declined 3.25 cents, closing at $1.8975 with 11 loads traded. The sellers stepped up to take advantage of the higher prices to move some cheese. The barrel cheese price declined 2.50 cents, closing at $1.8550 with four loads traded. The dry whey price declined a penny, closing at 54 cents with two loads traded. Class III futures are mixed from 23 cents lower to 8 cents higher. The butter price remained unchanged at $2.3425 with no loads traded. There were three unfilled bids and two uncovered offers remaining at the close of spot trading, as buyers and sellers were not aggressive in accomplishing business. Grade A nonfat dry milk increased 0.50 cent, closing at $1.23 with one load traded. Class IV futures have traded steadily at Friday's prices. Butter futures are steady to 2.12 cents higher. Dry whey futures have only traded in the July contract at 0.47 cent lower.