Traders Show Disappointment

GENERAL OVERVIEW:

Class III futures closed mixed while Class IV futures closed lower in most contracts. Traders resigned to the fact that the market may not be ready to trend higher. Tuesday is the last day to trade July futures and options.

MILK:

The early anticipation of strength in the spot market did not come to fruition. Cheese and butter prices took a pause, leaving traders wondering whether prices will have sufficient strength to turn higher or whether sellers will become impatient and lower their offers. Discussions revolve around whether buyers will step up to the plate soon and purchase supplies to build inventory in preparation for upcoming demand or whether they will remain comfortable purchasing on an as-needed basis. Milk production continues to remain above a year ago. Time is running out for hot weather to have an impact on milk output. August can have plenty of hot days that could impact production, but two months of the summer are already behind us. We will see the full impact of the hot weather when the July Milk Production report is released later this month. Milk production and components have been impacted, but many producers indicate their cows are holding production well. The July Federal Order class prices will be released on Wednesday. The trade anticipated a Class III price of $15.63 and a Class IV price of $18.49.

AVERAGE CLASS III PRICES:

CHEESE:

Buyers generally turn more aggressive during this time of year as they look ahead to fall and holiday demand. Packagers and recutters step up more aggressively to procure the cheese they need to build inventory for packaging for gift boxes and holiday promotions. They generally will not wait until they need it. The unknown is whether they have already been purchasing and may not need to be as aggressive as the year progresses.

BUTTER:

Sellers were not interested in selling any butter on the spot market today. There were 58 uncovered offers placed during spot trading, but none of the offers were reduced to get any business done. With reduced cream supplies and churning activity, plants may not need to move inventory with any urgency.

OUTSIDE MARKETS SUMMARY:

December corn closed down 7.00 cents per bushel at $4.6550, November soybeans closed down 14.50 cents at $11.7775 and December soybean meal closed down $3.20 per ton at $318.40. September Chicago wheat closed down 12.50 cents at $6.3850. October live cattle closed up $1.18 at $227.90. September crude oil is down $5.17 per barrel at $75.17. The Dow Jones Industrial Average is up 907 points at 54,086, with the NASDAQ up 671 points at 26,585.

Robin Schmahl can be reached at rschmahl@agdairy.com