This is about one week powder U.S. production, Is this a repeat of the same people that  locked powder long term CHEAP back in 2006.  Hopefully our Co-ops have NOT forgotten what transpired. It is now that we need our leadership to step up to the plate and head off this disaster by greedy selfish interests!

Weekly California NFDM Prices Plummet, Futures Limit Down; Cheese Spread Getting Back to Normal
http://www.cmegroup.com/daily_bulletin/Section04_Agricultural_Soft_AltInvestment_Futures_2010016.pdf
1/26 Class III Futures  :   Volume:  1257  Open Interest (OI) Change:  +448   Total OI:  28,967    
1/26 Class III Options:   Est. Put Volume:  1018  Total OI:  25,983   Est. Call Volume:  700  Total OI:  23,935
1/26 Spot Markets:   Block Cheese $1.5150 (UP 1),  Barrel Cheese $1.5050 (DOWN 1),  Butter $1.42 (DOWN 1 1/2),  NFDM: A $1.22 (DOWN 3);  X $1.24 (DOWN 26)

1/26 Individual Class III Month Prices, Change, Volume & Open Interest  
Jan - $14.54     UP 1              Vol:  80             OI Change:  UP 2
Feb - $14.15     DOWN 6       Vol:  161           OI Change:  UP 73
Mar - $13.95    DOWN 15     Vol:  217          OI Change:  UP 56
Apr - $14.05    DOWN 11      Vol:  127          OI Change:  UP 19
May - $14.38    DOWN 16     Vol:  159           OI Change:  UP 94
Jan-Dec Avg:                  $15.02          DOWN 8

Class III Milk futures followed a familiar path yesterday - open higher in the overnight, fade back to unchanged going into the cash cheese market and fall apart after the cash cheese trade no matter what the outcome.    With the exception of January, all futures months fell 2-16 cents on strong volume.  Open interest increased nearly 450 contracts, a potential sign that the futures down move may be sustainable in the short term.  Option activity was quite strong yesterday with over 1000 puts and 700 calls traded.

CME cash cheese prices appear to be working itself out of the abnormal spreads it has endured since late November.   Block cheese prices are at a premium to barrels for the first time since January 5 and we can almost hear the collective industry's sigh of relief.   Barrel volume has picked up this week with 10 loads exchanging hands so far and if this volume trend continues, we may see weekly CME barrel volume at its highest since late August.  Contacts are telling us that barrel cheese is in ample supply in the country and perhaps that is why offers started making their way to Chicago.   We have not heard a lot of talk regarding the block market, but the Midwest cheese manufacturers that had been pounding the spot market with cheese in December has been surprisingly quiet.   As we approach the 30 day mark on cheese made in late December, it would not surprise us to see some of those blocks make their way to the exchange.

Class IV commodities continue to take their lumps at the exchange.   Spot butter dropped another 1 1/2 cents to $1.42 and futures finished steady to a penny lower on strong volume and open interest.   Good two-sided trading hints to us that both buyers and sellers see value at these prices.   Spot NFDM also declined yesterday as Grade A and Extra Grade lost three and six cents, respectively.  Futures fell 1 to 2 1/2 cents yesterday on another strong volume day.   Even Class IV futures had a strong volume session as a total of 80 contracts traded yesterday.

Last night, the California Weekly Average Price (CWAP) for NFDM was announced for the week ending Jan 22.  The data was a shocker:  Over 33.6 million pounds was transacted at an average price of $1.0542.   That figure is nearly 25 cents lower than the previous week's number and the weekly volume was an all-time high, eclipsing the old 31 million lb weekly mark set in January 2008.   This clearly looks like a dumping of excess inventories and our best guess is that this volume is likely headed for export.  NFDM futures are down the limit in overnight trade on strong volume and may continue that way through the end of the week.

Look for the grain complex to open mostly lower, but we expect a choppy two-sided trade on little fresh news today.