vs Last vs Last Market 8-Sep 1-Sep 25-Aug 18-Aug 11-Aug 4-Aug

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1 DAIRY Volume 21 Number 35 and grain Market 8-Sep 1-Sep 25-Aug 18-Aug 11-Aug 4-Aug 4% -5% Barrel Cheddar (CME average; lb) $ $ $ $ $ $ % -5% Block Cheddar (CME average; lb) $ $ $ $ $ $ % 21% Butter (CME average; lb) $ $ $ $ $ $ % -7% Nonfat Dry Milk (CME average; lb) $ $ $ $ $ $ % 25% Dry Whey (AMS Central AOM; lb) $ $ $ $ $ $ % 13% WPC (AMS Central/West AOM; lb) $ $ $ $ $ $ % 11% Dry Buttermilk (AMS West AOM; lb) $ $ $ $ $ $ % -4% Class III Futures (CME 2nd nearby; cwt) $ $ $ $ $ $ % -6% Cheese Futures (CME 2nd nearby; lb) $ $ $ $ $ $ % 16% Cash Butter Futures (CME 2nd nearby; lb) $ $ $ $ $ $ % 11% Dry Whey Futures (CME 2nd nearby; lb) $ $ $ $ $ $ % -10% NDM Futures (CME 2nd nearby; lb) $ $ $ $ $ $ % 4% Class IV Futures (CME 2nd nearby; cwt) $ $ $ $ $ $ % 4% Corn (CBOT nearby; bu) $ $ $ $ $ $ % -4% Soybeans (CBOT nearby; bu) $ $ $ $ $ $ % 10% Wheat (CBOT nearby; bu) $ $ $ $ $ $ % -7% Soymeal (CBOT nearby; ton) $ $ $ $ $ $ % 6% Soyoil (CBOT nearby; lb) $ $ $ $ $ $ % -29% Cocoa (ICE nearby; ton) $ 1,972 $ 1,987 $ 1,962 $ 1,922 $ 1,990 $ 2,014 2% -30% Sugar #11 (ICE nearby; lb) $ $ $ $ $ $ % -22% Orange Juice (ICE nearby; lb) $ $ $ $ $ $ % -14% Coffee (NYMEX; lb) $ $ $ $ $ $ % 5% Lean Hogs (CME nearby; lb) $ $ $ $ $ $ % 3% Live Cattle (CME nearby; lb) $ $ $ $ $ $ % 4% Natural Gas (NYMEX nearby; mmbtu) $ $ $ $ $ $ % 4% Crude Oil (NYMEX nearby; bbl) $ $ $ $ $ $ % 21% Unleaded Gas (NYMEX nearby; gal) $ $ $ $ $ $ % 23% Heating Oil (NYMEX nearby, gal) $ $ $ $ $ $ % 21% Dow Jones Industrials 21,798 21,998 21,814 21,675 21,858 22,093-1% 24% NASDAQ 6,360 6,437 6,266 6,217 6,257 6,352-1% 16% S&P 500 Index 2,461 2,478 2,443 2,426 2,441 2,477 1% 7% Euro/Dollar % 7% Canadian Dollar/Dollar % 1% Gold $ 1,346 $ 1,325 $ 1,293 $ 1,287 $ 1,288 $ 1, Crossroads Drive, Suite 3900 Madison, WI info@blimling.com 2017 Blimling and Associates, Inc. This report is prepared for the exclusive use of Blimling and Associates clients. Reproduction in part or in whole without permission is strictly prohibited. This information is carefully compiled, but not guaranteed to be complete or free from error; nor does it constitute a solicitation to buy or sell futures/options contracts. Futures and options trading involves risk. Contact a licensed professional for more information.

2 Butter Global Butter Prices $4.00 $3.75 $3.50 $3.25 $3.00 $2.75 $2.50 $2.25 $2.00 $1.75 Dec Jan Feb Mar Apr May Jun Jul Aug Dollars per Pound; USDA US GDT Germany Total Butter Cheese Production 1, , Million Pounds (30-Day Months); USDA If the global butter markets were a track and field event, the EU would be way out in front, even lapping Oceania. And despite puzzled looks and hoots from spectators, the US is sometimes running in the opposite direction. This week, butter prices in the Netherlands reached yet another record-breaking high, with prices at 6,950 per metric ton, or $3.67 per pound at 80% test. That's 1.5% higher than last week in Euro terms. Prices in Germany held steady at 6,925 ($3.66). Butter prices regained some momentum at the GlobalDairyTrade auction, rising to $5,954 ($2.63 per pound on an 80% fat basis) up 3.8%. The US market started the week moving lower. After dipping to $ on Tuesday, CME spot butter prices managed to rebound slightly to $ by week s end - five-cents lower than last Friday. Product keeps making its way to Chicago. Even with the Labor Day holiday, 32 lots changed hands, up from 28 from last week. Butter futures followed a similar course: drop and recover. Fourth quarter contracts finished the week at $ per pound still down $ from last Friday. The 2018 first quarter average closed at $2.3917, up $ Temperatures are cooling across the US and contacts have started to note seasonal demand improvement. But future supply concerns linger. Will there be enough butter in the right hands in the right places at the right time as holiday season demand heats up? Cream is still available at comparatively low cost, so churns have plenty to keep them busy for the time being. USDA data implied a multiple of 124 for the Upper Midwest, unchanged from last week, but down from 127 last year and well below the five-year average of 130. An abundance of available cream led to an uptick in butter production in July. According to the USDA Dairy Products report, output increased to million pounds up 1.6% from last year. Even with the yearover-year increase, year-to-date production through July was running about 1% below Despite the widening price gap between US butter and 2

3 the rest of the world, export opportunities still appear limited. According to USDA, outbound shipments dropped to 3.1 million pounds in July down 51.5% from June. But compared to last year, volume jumped 36.5%. At the same time, July imports rose to 6.6 million pounds, up 28.5% from June and 44.1% higher than Cheese Net Butter Trade (1) (2) (3) (4) (5) (6) (7) Million Pounds; USDA CME Spot Cheddar Prices $1.90 $1.80 $1.70 $1.60 $1.50 $1.40 $1.30 Jan Feb Mar Apr May Jun Jul Aug Dollars per Pound Blocks Barrels Labor Day has come and gone. School is officially in session. On TV, this usually means the end of summer reruns and new episodes of our favorite shows. But the rerun season is not over in the cheese market. Spot prices are still range-bound, bouncing between $1.50 per pound and $1.70. Blocks did find some stability in the mid-$1.60s this week, ending Friday at $ per pound up $ Trading in the barrel market was a bit more tumultuous, but ultimately closed at $ up two cents. Spot market volume is still heavy by historical standards. Even with the Labor Day holiday, a total of 22 lots of blocks and 62 barrels changed hands, up from a cumulative total of 41 last week. Consider: over the past five years, week 36 volume averaged about nine cars combined. Cheese futures were not impressed with the spot market s see-sawing. Fourth quarter 2017 contracts sank to $ per pound, down $ from last Friday. First half 2018 contracts followed a similar trajectory, tumbling to $1.6510, off $ Class III milk futures fell by a steeper degree, with the first quarter average landing at $15.59 per hundredweight a 39-cent drop. Contacts continue to point to fair demand across the retail sector. And recent data points to softness across the restaurant industry. Nation s Restaurant News reported same-store-sales down 2% year-over-year in August, while traffic dropped by nearly 4%. But, results were modestly stronger compared to July. Milk remains seasonally snug for cheesemakers as bottling plants take a bit more for school needs. USDA/ AMS Dairy Market News cited spot milk prices between $1.50 under and $1.00 over class. 3

4 1,050 1,025 1, Total Cheese Production In July, plenty of milk made its way into vats. The Dairy Products report showed total July cheese production at billion pounds, 1.0% (10 million pounds) more than last year. Year-to-date through July, US cheese manufacturers pumped out 173 million pounds more than in That s about 820,000 pounds more cheese every day. GDT cheddar prices climbed higher at this week s auction, closing at $4,118 per metric ton ($1.87 per pound) up 2.8%. Germany Gouda prices remained steady for the fourth consecutive week at 3,575 per metric ton, or $1.94 per pound. Even though US cheese has been lower priced than cheese from the EU or Oceania, export activity remains quiet. CWT aided in the sale of nearly 794,000 pounds of cheese this week, with delivery over the next three months. In July, exporters moved 60.1 million pounds of cheese abroad down 10.8% from June. But compared to a year ago, export activity is holding up, increasing 13.7% (7 million pounds) from July Million Pounds (30-Day Months); USDA GlobalDairyTrade Results $7,500 $6,500 $5,500 $4,500 $3,500 $2,500 $1,500 Oct Dec Feb Apr Jun Aug Per Metric Ton; GDT Cheese Butter WMP SMP AMF Nonfat Dry Milk The NDM market is still struggling to find solid footing. Powder prices drifted lower again at this week s GDT auction. SMP dropped to $1,944 per metric ton ($0.88 per pound), down 1.2% to the lowest price since April. WMP declined as well, closing at $3,100 ($1.41), off 1.4%. European prices dipped lower, too, with the Dutch quotation falling to 1,660 per metric ton ($0.90 per pound) a 3.5% drop in Euro terms. US NDM prices also weakened. Prices at the CME spot market closed at $ per pound on Friday down $ from week-over-week and at the lowest level since mid-april. The futures market took a big step lower with fourth quarter contracts falling to $0.8449, down $ First half contracts sank too, falling to $ per pound, off $ week-over-week. Manufacturers stocks climbed higher again in July reaching the highest level since The USDA Dairy Products report showed inventories at million pounds, up 16.2% (42 million) from last year and 1.1% from June. Production rates slipped, with July NDM/ 4

5 NDM: Spot Price and Volume $ $ $ $ $ $ $ $ Apr May Jun Jul Jul Aug Dollars per Pound Volume Spot Price US NDM Manufacturers' Stocks Million Pounds; USDA SMP output dropping to million pounds, down 0.5% year-over-year. Inventory levels are climbing across the international market too. European manufacturers sold 1,325 metric tons into EU Intervention this week, taking the cumulative volume sold into the program in 2017 to 10,043 metric tons. Softer exports may have aided in July s inventory gain. July NDM/SMP exports fell below the 100-million pound mark for the first time since last June, with USDA reporting exports at 93.1 million pounds. Shipments dropped 7.7% from June and 12.3% (13 million pounds) from July Year-to-date shipments were still tracking 14.5% ahead of 2016, however, at million pounds. Other US indices weakened slightly, with USDA/AMS reporting the Central states average down a quartercent to $ per pound. The Western average held steady at $ Survey prices moved lower with NDPSR dropping to $0.8706, down $ CWAP fell to $0.9104, $ lower. Dry Whey Dry whey futures fell, with the fourth quarter average sinking to $ per pound off $ from last Friday. Contracts further down the board were even more affected. Overall, the 2018 first half average landed at $0.3373, down $ According to the USDA/AMS Dairy Market News, day-to -day prices also slipped. The average in the Central states inched a half-cent lower to fall to $ per pound while the Western average dropped $ to slide to $ Survey prices also weakened, with NDPSR reporting the price down $ at $ per pound. Dry whey production continued to flourish in July, with the USDA Dairy Products report showing the total at the highest level since December 2013 at 99.2 million pounds up 21.0% from Whey stocks jumped to 95.1 million pounds, up 37.2% year-over-year. According to the USDA, the US exported 37.6 million pounds of whey in July up 2.1% from last year but 3.9% lower than in June. 5

6 Grains $0.43 Oct-Dec 2017 Whey Futures It was a quiet week in the corn market, with traders still waiting on yield data before making any moves. As a result, the December corn futures contract inched just $ higher week-over-week to reach $ per bushel. Meanwhile, soybeans rallied due to lingering questions regarding yield and recently dry weather conditions. Overall, the November contract picked up $ to climb to $ per bushel. Hurricane Irma is quickly making its way to the US, with many forecasts now showing copious amounts of rain in the Southeast. This may potentially impact harvest progress. $0.42 $0.41 $0.40 $ $0.38 $0.37 $0.36 May Jun Jul Aug Dollars per Pound; Source: CME Dec 2017 Corn Futures $4.20 $4.10 $4.00 $3.90 $3.80 $3.70 $3.60 $3.50 $3.40 Apr May Jun Jul Aug Dollars per Bushel; CME Across the country, college freshmen are settling into their new lives and grappling with something that doesn t compete with protests and political correctness for the media s attention, something that no one prepared them for, something that has nothing to do with being snowflakes and everything to do with being human. They re lonely. In a sea of people, they find themselves adrift. The technology that keeps them connected to parents and high school friends only reminds them of their physical separation from just about everyone they know best. -Frank Bruni 6

7 Price and Volume Data Week Ending 2-Sep 26-Aug -1% -5% NDPSR Block Cheddar (lb) $ $ % -11% NDPSR Barrel Cheddar (lb) $ $ % 25% USDA/NDPSR Butter (lb) $ $ % 2% USDA/NDPSR NDM (lb) $ $ % 44% USDA/NDPSR Dry Whey (lb) $ $ % -25% NDPSR Block Cheese Sales (mil lbs) % 22% NDPSR Barrel Cheese Sales (mil lbs) % -49% NDPSR NDM Sales (mil lbs) Week Ending 8-Sep 1-Sep -55% -17% Class III Futures Volume 3,993 8,818 4% -19% Class III Futures Open Interest 24,554 23,618-38% 87% Cash-Settled Cheese Futures Volume 2,173 3,501 6% -18% Cash-Settled Cheese Open Interest 18,929 17,832-20% -23% Cash Butter Futures Volume 827 1,036 7% -19% Cash Butter Futures Open Interest 5,418 5,055 92% 226% Nonfat Dry Milk Futures Volume 1, % 27% Nonfat Dry Milk Futures Open Interest 6,214 5,706-28% 373% Dry Whey Futures Volume % -12% Dry Whey Futures Open Interest 3,502 3,291 CME Spot Markets Block Cheddar 4-Sep 5-Sep 6-Sep 7-Sep 8-Sep Total Settle $ $ $ $ $ Volume Barrel Cheddar 4-Sep 5-Sep 6-Sep 7-Sep 8-Sep Total Settle $ $ $ $ $ Volume Grade AA Butter 4-Sep 5-Sep 6-Sep 7-Sep 8-Sep Total Settle $ $ $ $ $ Volume Grade A NDM 4-Sep 5-Sep 6-Sep 7-Sep 8-Sep Total Settle $ $ $ $ $ Volume Market 8-Sep 1-Sep 25-Aug 18-Aug 11-Aug 4-Aug 28-Jul -3% -14% Skim Milk Powder (Dutch Dairy Board) 1,660 1,720 1,720 1,720 1,740 1,740 1,740 0% 25% Whole Milk Powder (Dutch Dairy Board) 3,100 3,100 3,100 3,100 3,100 3,100 3,050 1% 79% Butter (Dutch Dairy Board) 6,950 6,850 6,800 6,650 6,500 6,300 6,190-7% -13% Whey (Dutch Dairy Board) % -12% Skim Milk Powder (Kempten, Germany) 1,720 1,750 1,775 1,815 1,815 1,815 1,795-1% 26% Whole Milk Powder (Kempten, Germany) 3,225 3,250 3,250 3,280 3,200 3,150 3,100 0% 64% Butter 25 kg (Kempten, Germany) 6,925 6,925 6,775 6,650 6,550 6,400 6,250 0% 28% Edamer, 40% (Hannover, Germany) 3,575 3,575 3,575 3,575 3,575 3,550 3,550-1% -13% Skim Milk Powder (GlobalDairyTrade) $ 1,944 $ 1,968 $ 1,968 $ 1,968 $ 1,966 $ 1,966 $ 2,024-1% 11% Whole Milk Powder (GlobalDairyTrade) $ 3,100 $ 3,143 $ 3,143 $ 3,143 $ 3,155 $ 3,155 $ 3,114 3% 34% Anhydrous Milk Fat (GlobalDairyTrade) $ 6,402 $ 6,199 $ 6,199 $ 6,199 $ 6,289 $ 6,289 $ 6,577 3% 20% Cheddar Cheese (GlobalDairyTrade) $ 4,118 $ 4,005 $ 4,005 $ 4,005 $ 3,932 $ 3,932 $ 4,112 4% 58% Butter (GlobalDairyTrade) $ 5,954 $ 5,735 $ 5,735 $ 5,735 $ 5,747 $ 5,747 $ 6,004-2% Buttermilk Powder (GlobalDairyTrade) $ 2, $ 2,198 $ 2,198-1% -6% Rennet Casein (GlobalDairyTrade) $ 6,316 $ 6,255 $ 6,255 $ 6,255 $ 6,122 $ 6,122 $ 6,358 5% -4% Rennet Casein (AMS US; lb) $ $ $ $ $ $ $ % 16% Acid Casein (AMS US; lb) $ $ $ $ $ $ $ % -5% Lactose Edible (AMS Central/West AOM; lb) $ $ $ $ $ $ $ All figures are per metric ton unless otherwise noted. 7