Follow Through Buying Surges Dairy Prices

• Milk surged for the second straight day with 1,468 contracts trading Friday in the second month Class III contract.
• Spot barrels were bid up 7 cents with no offers, sellers have taken a bullish tone with more possible upward price momentum next week.
• The spot butter price closed at a 2023 high, settling Friday’s trade at $2.5825/lb.
• This week’s GDT Index fell, milk production stagnant YoY on a declining herd, Cattle on Feed showed YoY inventories down and placements up.

After last week’s positive trade in the markets, we found follow through opportunities and then some. At some points yesterday and today, some milk contracts were limit up, while the 2nd month Class III contract had its second best day this year in terms of volume with 1,468 contracts traded. Overall, prices in milk were in the green, but the Class III market surged this week with 2nd month contract gaining $1.61/cwt, Q3 average up $1.11, and Q4 average higher by $0.94. Gains were not limited to just milk prices as the spot markets found higher prices and continued buying. Sellers in the spot cheese market felt strong enough to sit on the sidelines as bids upped the spot price by $0.07/lb. on Friday.  Butter also continued its steady climb higher, a string of 6 straight weeks of up, to a 2023 best price of $2.5825/lb.  Dairy cow culling continues at rates higher than year ago numbers, which is keeping milk production numbers in check as the last report showed June’s overall production flat YoY. Production per cow does continue to improve, which kept the downtrend in herb numbers relatively in check. Overall, cattle numbers continue to be down from last year’s numbers with current cattle on feed being down 2%, while placements were up 3%. The GDT auction from earlier in the week saw the index fall to 959 points, its lowest point in three years, despite the weakness, domestic markets still had strength to move higher.