Class III Futures
Overnight, class III is getting pummeled. Milk production is a big part of it, technical selling another. Milk is down, other products are on offer, whereas the likes of butter had been on feature as a bid market for a period of time; it can now be bought at unchanged with ease and lower without breaking a sweat. Good volume on the downside move means the bear is showing its claws and watch out below with all the recent wave of news related to increased milk production the momentum is turning and by 4th quarter, the bull like the bully might have things reversed and get stuffed in a locker.
Class III futures ended the week with prices settling between 9 cents lower and 5 higher ahead of the release of the Milk Production Report for the month of June despite gains posted during the spot cheese session in both the Block and Barrel markets. The third quarter futures pack average fell 6 cents lower for the day, but rallied 41 cents week over to settle at the price of $21.06.
The Milk Production Report for the month of June released Friday posted with bearish results in our opinion versus expectations. Milk production for the month of May was revised 27 million pounds higher while the total cow number was revised 3,000 head higher. Total U.S. production for June was estimated at 17.265 billion pounds; down 1.34% from May’s level while 1.95% higher than during the same period last year. Total U.S. milking cows were estimated at 9.266 million head, up 0.12% month over month, while milk per cow was estimated at 1,863 pounds, down 1.48% month over month. For the 23 states, total production was estimated at 16.177 billion pounds, down 1.22% month over month while 2.00% higher year over year. Milking cows for the 23 states were estimated at 8.570 million head, up 0.13% month over month, with production per cow estimated at 1,888 pounds, down 1.32% from the month prior.
Over 80% of the state of California is now within an extreme drought condition, up from 68% three months ago. Coupled with the high temperatures registered in the region milk production has suffered, though the declines in daily milk production has been seen recently in the surrounding states as well. After speaking with some producers in the region we have heard of milk intakes falling by as much as 10% in the last couple weeks, lending support to the markets amidst rapidly declining international prices.
For the week ending July 5th the dairy cow slaughter under federal inspection decreased by 6,100 head (12.8%) week over week to 41,600 head. The year-to-date slaughter now totals 1,448,700 head, 10.7% lower than during the same period last year.