Dairy markets: Can cheese stay at $2.00?

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Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.

It was a trading day marked by slightly higher Class III prices on low trading volume. Spot prices bid up in blocks and barrels helped support the market. The 2H 2014 average settled at $20.00/cwt., up 6¢ on the day; the 3Q 2014 average gained 12¢ to settle at $20.46/cwt.

Since the end of May the market has just been a sideways grind, and without some fundamental news or a real change in spot prices, it looks to continue as we move on into the week.

One has to wonder if we can keep spot cheese prices around the $2.00/lb. level for much longer. We have heard that cheese is available and supplies are better than they had been through most of the first half of the year. So why have we not seen a continued fall-off in pricing? Is it just a function of the market having a delayed reaction to current production, or is it widely anticipated that the export market will continue to be strong for cheese, and market participants do not want to get caught on the wrong side of the trade. Is the demand just not there domestically or are traders worried because of the 8.0% pop in cheddar prices on the last GDT auction?

The next GDT auction is June 17, with the U.S. milk production report due on June 18.

Class IV markets took a little dip, but it was on very little volume. Continued weakness in the spot butter markets and weaker NFDM futures were the culprit, and from a technical perspective the market continues to march sideways. The 2H 2014 average lost 4¢ to settle at $20.14/cwt.

 

June 9 spot session results:

Block cheese: $2.06 (up 1.0¢)

Barrel cheese: $1.9725 (up 0.5¢)

Grade A NFDM: $1.8575 (unchanged)

Butter: $2.21 (down 1.25¢)

 

Today's expectations:

• Class III & Cheese to open higher

• Dry Whey to open mixed

• Class IV, Butter & NDFM to open mixed

 

Grain futures

Last Friday’s rally failed to inspire any follow through, with the corn market testing previous lows before coming back to support levels by the end of Monday’s session. Timely precipitation across portions of the Corn Belt and perfect overall conditions were on the top of traders’ minds. Reports that China had stopped permitting U.S distillers dried grains because of unapproved GMOs in some shipments started the decline early in the session. The July corn market settled at $4.51/bushel, down 8¢ on the day. Soybeans initially followed the move in corn, but managed to get higher by the end of the session. The July contract ended up unchanged on the day, settling at $14.57/bushel. Today’s trade will be tricky, with USDA’s World Ag Supply & Demand Estimates report out on Wednesday.

 

Today’s expectation:

• Corn & Soybeans to open steady to slightly higher

 

FC Stone's annual Dairy Outlook Conference will be held June 18-19, in Chicago. Visit www.intlfcstone.com/events for information.

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