June 23, 2023
Milk Markets Find Support
- Second month, Q3, and Q4 Class III contracts all closed higher this week; Class IV fared similarly although Q4 did fall 3 cents.
- The spot markets for cheese, whey, powder, and butter were mixed with marginal gains and losses.
- May butter inventory was 14% larger while cheese inventories were 1.5% smaller than last year.
- US dairy cow culling for the week ending June 10th, up 13.7% from the same week last year.
Milk futures were able to finally find support in the marketplace. Class III second month futures held off from falling below $15 while gaining 7 cents through the week to settle at $15.38. The Q3 and Q4 Class III contracts were marginally higher but ended a skid of lower prices. Q3 had finished with a lower weekly close lower for the last eight weeks and twenty-one of the last twenty-seven weeks prior to this weeks positive close. Class IV maintains its premium over its counterpart with second month futures finding 13 cent gains on the week and a mixed close between Q3 and Q4. Today’s Cold Storage report showed butter inventories at 45.1 million pounds greater than May of last year, a 14% growth. Butter inventories are above the 5-year average but below inventory levels from 2020 and 2021. Total cheese inventories have reduced 22.5 million pounds from last May. Despite the reduction in inventory from last year, cheese remains well above the 5-year average for May and behind only the total inventory from last May. Cattle on Feed report from today showed total cattle on feed still behind last years June total by 3% while placements seems to be on the rise in the last report. Dairy cow culling has been on the rise, in comparison to last year, over the last three weeks.
Wetter Forecasts U-Turn Markets
- Front month corn contracts peaked on Wednesday above $6.70 per bushel on Wednesday but closed Friday nearly a dollar lower at $5.84, largely attributed to a contract roll.
- Models continue to add slightly better chances for rain within the “I” states and other parts of the Midwest experiencing dryness.
- For now the forecasts have lowered grain prices but drought areas continue to expand; drought conditions currently encompass 64% and 57% of corn and soybean production areas, respectively.
- Crop ratings have plunged due to lack of moisture with a 6 point drop in good/excellent ratings and in increase in poor/very poor ratings of 12%.
- Current crop conditions at this time of the year can point to below average yields.
Meal Rolls and Gaps Lower Friday
- In a very similar fashion to corn, front month bean meal futures turned sharply mid week; the contract both gapped and closed lower on Friday, a $30/ton difference in the close from Wed to Fri.
- Argentina has been busy buying Brazilian beans, second only to China for the month of May.
- Crop ratings took a big hit this week with good/excellent seeing a 5 point drop while poor/very poor ballooned 12%.
- A glut of Brazilian beans are already delivered and en route to China. Soymeal demand has softened in China as the hog farmers are budgeting rations.
Friday’s Market Quotes