Dairy cash markets stable Wednesday; futures consolidate

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Editor’s note: This market commentary is provided by the Dairy Division at FCStone/Downes-O'Neill in Chicago, Ill.

Many dairy market participants began pricing August milk yesterday, and as such they brought August futures up from their discount to move toward the still firm cheese market pricing calculations. There were no price increases in spot today — a break in the upward trend that began last Friday, but they were unchanged with two remaining bids. Right now, though, heat is the talk of the town, and it has brought to mind that some buyers are “stockpiling” just in case production decreases hit hard. Forecasts mostly call for an easing of temps into early/mid next week, but others argue that, regardless, some significant damage will have been done to the cows until their next lactation.

In the meantime, the Cooperatives Working Together program continues to do its part to export cheese, accepting bids to assist in the export of an additional 1.7 million lbs of cheese for delivery through November. The program now totals assistance on 50.8 mil/lbs for the year. But to counter that, weekly cold storage holdings were up 3.6% for cheese on the week. That was their biggest weekly percentage increase since 1/10/11, but we can’t put too much stock into that number when January turned out to be such a bullish month.

Cash-cheese futures stole a big chunk of the limelight that Class III left behind: 151 (+136 on OI- most of the day’s volume- suggestive that the trend will continue) trades following a string of decent-volume days and this market continues its life as a Barry Sanders-type of performer — inconsistent on volume, but sure to come back strong. Six trades occurred in December and the rest were all 2012, Jan-Nov. prices were mixed with no major moves in either direction.

 We look for Class III to open mixed.

Corn prices fell about 10 cents yesterday, and it is becoming clear that we will need a more dry, less wet forecast to give traders reason to take prices even higher. We will likely continue to chop around violently for some time until there is a clear opinion on the crop and it is deemed safer or beyond saving. A real break in temperatures is expected next week, Monday and Tuesday. Temperatures are expected to max out at not much more than 85 degrees.  However, temperatures will crank back up to the 90 degree level Wednesday–Sunday next week.

We look for corn to open 2 to 4 cents lower and soybeans to open 1 to 3 higher.

 Daily CME spot market prices:

Block cheese: $2.14 (unchanged)

Barrel cheese: $2.115 (unchanged)

Butter: $2.035 (unchanged)  

Grade A NFDM: $1.525 (unchanged)     

These data and comments are provided for information purposes only and are not intended to be used for specific trading strategies. Commodity trading is risky and FCStone Group, Inc., International Assets Holding Corporation, and their affiliates assume no liability for the use of any information contained herein. Although all information is believed to be reliable, we cannot guarantee its accuracy and completeness. Past financial results are not necessarily indicative of future performance. Any examples given are strictly hypothetical and no representation is being made that any person will or is likely to achieve profits or losses similar to those examples. References to and discussions of exchange traded products are made solely on behalf of FCStone, LLC. References to and discussions of OTC products are made solely on behalf of INTL Hanley, LLC, and OTC products are only available to eligible counterparties.

 

 




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