Futures Relatively Quiet Overnight
Trading in milk futures was confined to the May Class III contract with price remaining unchanged. The decline of barrels and steady blocks Tuesday provides conflicting information as to market strength. USDA will release the April Federal Order class prices Wednesday.
Opening Calls:
| Class III Milk Futures: | Steady to 4 Higher |
| Class IV Milk Futures: | 5 to 10 Higher |
| Butter Futures: | Mixed |
Outside Market Opening Calls:
| Corn Futures: | Steady to 1 Higher |
| Soybean Futures: | 1 to 2 Higher |
| Soybean Meal Futures: | Mixed |
| Wheat Futures: | 2 to 4 Lower |
Milk:
The trend has been higher the past four days. The slight weakness of cheese Tuesday does put this strength in question, but futures will hold if cheese prices maintain current levels. There is concern futures could slip back again due to continued strong milk production keeping manufacturing plants running at capacity. Milk production will decrease as farms look to reduce milk output over the next month and possibly longer in order to get supply more closely aligned with demand. There is much anticipation as to the slow resumption of life as we knew it prior to the social distancing mandate and the closing of nonessential business. However, many people have indicated they will be slow to change anytime soon as concern still remains over the coronavirus. The food service industry will not return to the level it had been at the beginning of the year. The high rate of unemployment may also limit overall demand of goods and services for a period of time.
Cheese:
Cheese took a pause and showed slight weakness Tuesday, but there is no indication prices could retrace back to where it had been. There is also no indication as to a continued trend higher. Current prices may bring in more aggressive selling under current market supplies.
Butter:
Price appears to be carving out a sideways trading range. Manufacturing plants remain actively churning, utilizing plentiful cream supplies. Buyers are picking up supply and current low prices to increase ownership for possible increasing demand as the year progresses. Buyers would rather have extra supply on hand as a hedge against higher prices later in the year if it were to unfold.
Robin Schmahl can be reached at rschmahl@agdairy.com
CME’s Milk contract replaced the BFP Milk contract in January 2000. This change was made to properly reflect the price of milk used in the manufacturing of cheese under the revised government federal pricing classification system for all uses of milk.
CME added the Milk Class IV contracts in July 2000 in response to industry need. These contracts provide opportunities for hedging of butterfat risks using the revised Milk (Class III) contracts. CME Milk Class IV is used in the production of butter and all dried milk products.