Dairy markets: Milk production report sends markets lower

 Resize text         Printer-friendly version of this article Printer-friendly version of this article

Class III Futures

Overnight, class III is getting pummeled. Milk production is a big part of it, technical selling another. Milk is down, other products are on offer, whereas the likes of butter had been on feature as a bid market for a period of time; it can now be bought at unchanged with ease and lower without breaking a sweat. Good volume on the downside move means the bear is showing its claws and watch out below with all the recent wave of news related to increased milk production the momentum is turning and by 4th quarter, the bull like the bully might have things reversed and get stuffed in a locker.

 Class III futures ended the week with prices settling between 9 cents lower and 5 higher ahead of the release of the Milk Production Report for the month of June despite gains posted during the spot cheese session in both the Block and Barrel markets.  The third quarter futures pack average fell 6 cents lower for the day, but rallied 41 cents week over to settle at the price of $21.06.

The Milk Production Report for the month of June released Friday posted with bearish results in our opinion versus expectations.  Milk production for the month of May was revised 27 million pounds higher while the total cow number was revised 3,000 head higher.  Total U.S. production for June was estimated at 17.265 billion pounds; down 1.34% from May’s level while 1.95% higher than during the same period last year.  Total U.S. milking cows were estimated at 9.266 million head, up 0.12% month over month, while milk per cow was estimated at 1,863 pounds, down 1.48% month over month.  For the 23 states, total production was estimated at 16.177 billion pounds, down 1.22% month over month while 2.00% higher year over year.  Milking cows for the 23 states were estimated at 8.570 million head, up 0.13% month over month, with production per cow estimated at 1,888 pounds, down 1.32% from the month prior.  

Over 80% of the state of California is now within an extreme drought condition, up from 68% three months ago.  Coupled with the high temperatures registered in the region milk production has suffered, though the declines in daily milk production has been seen recently in the surrounding states as well.  After speaking with some producers in the region we have heard of milk intakes falling by as much as 10% in the last couple weeks, lending support to the markets amidst rapidly declining international prices.

For the week ending July 5th the dairy cow slaughter under federal inspection decreased by 6,100 head (12.8%) week over week to 41,600 head. The year-to-date slaughter now totals 1,448,700 head, 10.7% lower than during the same period last year.

We look for Class III to open 5 to 15 lower

Cheese Futures

Cash-settled cheese futures settled for the week with mixed prices, closing between 1.0 cents lower and 0.6 higher, with the gains posting in the deferred month contracts.  The third quarter futures pack finished out the week at the price of $2.0067, down 0.40 cents for the day while gaining a total of 3.84 cents week over week.

The National Dairy Products Sales Report (NDPSR) for the week ending 7/12 posted with the Block Cheddar cheese price at $2.0315, down 0.87 cents week over week with total sales estimated at 13,322,925 pounds, an increase of 28.9% week over week.  The Barrel Cheddar price gained 0.23 cents, posting at $2.0502, with total sales estimated at 10,609,167 pounds, up 22.2% from the week prior. The weekly cold storage holdings report for selected storage centers for the week ending 7/11 posted with cheese stocks estimated at 90.198 million pounds, down 2.0% week over week while 22.1% lower compared to the same period last year.  Last week’s GDT auction held on July 15th resulted in the all-contracts Cheddar cheese price fell lower by 1.6% to $1.8887.

The GDT price index fell by 8.9% during this event, while having fallen 35% lower since February.  The Dairy Market News (DMN) bi-weekly international prices report released July 17th revealed weakness in the Oceania Cheddar price again, this time falling 3.40 cents lower (-1.65%) to $2.0298.

We look for cheese futures to open lower

Class IV Futures

Class IV futures finished out the week between unchanged and 19 cents lower as both component markets succumbed to selling pressure.  The third quarter futures pack average slipped 3 cents lower on Friday to settle at the price of $22.89 while increasing by a total of 53 cents week over week.

We look for Class IV to open lower 

 NFDM Futures

NFDM futures fell to bearish pressures Friday as contracts settled between unchanged and 2.250 cents lower.  The third quarter futures pack average fell 0.250 cents on Friday to end the week at the price of 177.333, yet gained a total of 0.341 cents week over week.

 The NDPSR price for the NFDM for the week ending 7/12 gained 1.97 cents week over week to post at $1.8845 with total sales estimated at 18,618,029 pounds, down 16.7% week over week.  The CWAP for the week ending 7/11 declined by 1.18 cents (0.65%) to $1.8043, 7.8% higher than the price for the same period last year.  Sales for the week totaled 11,695,253 pounds, down 17.8% from the week prior.  The recent GDT auction resulted in the all-contracts SMP price dropping 7.1% lower to $1.5947, and when adjusted to the approximate NFDM equivalent to $1.6914.  The all-contracts WMP price followed suit, declining by 10.9% to $1.4009. The DMN international prices report out last week posted with the Oceania SMP price falling down 8.40 cents (4.81%) to $1.6840 while the WMP price dropped 9.64 cents (5.72%) to $1.5876.  The Western Europe SMP price declined by 1.13 cents (0.65%) to $1.7407 while the WMP price fell 7.37 cents (3.64%) lower to $1.9505. 

 The August NZX SMP contract settled at $3,550/MT, down $200/MT from the week prior while the August WMP contract settled down $230/MT from the week prior at $2,900/MT.

We look for NFDM to open soft

Butter Futures

Butter futures between unchanged and 3.500 cents lower after an active trading session which saw a total of 87 trades take place.  The third quarter butter futures pack average dropped 1.459 cents lower on Friday to finish out the week at 229.833, while registering a week over week total gain of 8.116 cents.

The NDPSR for the week ending 7/12 posted with the butter price at $2.13120, up 2.97 cents week over week.  Total sales were estimated at 3,984,082 pounds, up 36.0% week over week.  The weekly cold storage holdings report for selected storage centers for the week ending 7/11 estimated butter stocks at 21.444 million pounds, with a week over week increase of 0.2%, while sitting 9.6% higher than during the same period last year.  The July 15th GDT auction resulted in the all-contracts AMF price declining by 10.0% to the price of $1.4740, and when adjusted to the 80% butterfat equivalent to $1.1816.  The all-contracts butter price slipped 1.1% lower to post at $1.4261, and when adjusted to the 80% butterfat equivalent to $1.3913.  The all-contracts BMP price dropped 4.6% lower to $2.0074.  The DMN bi-weekly international prices report posted with the Oceania butter price declining by 4.54 cents (2.70%) to $1.6329 while the Western Europe butter price slipped 1.13 cents (0.52%) lower to $2.1546.

The NZX’s August AMF contract settled Friday at the price of 3,150/MT, down $630/MT week over week.

We look for butter to open soft

Dry Whey Futures

Dry Whey futures settled Friday’s session with mixed results as the July contract inched 0.4500 cents higher, September down 1.125 and the February through April of 2015 contracts finished  between 0.0250 cents lower and 0.700 higher, leaving all other contracts unchanged.  The third quarter futures pack average finished the week at the price of 66.2000, down 0.2250 cents on the day while increasing by a total of 0.0333 cents week over week. 

The National Dairy Products Sales Report’s (NDPSR) whey price for the week ending 7/12 slipped 0.68 cents lower to 68.76 cents with weekly sales totaling 8,739,512 pounds, up 46.5% from the week prior.  The DMN bi-weekly international prices report released July 17th posted with the Western Europe dry whey price holding 61.24, unchanged from the previous report. 

We look for whey to open steady

The trading of derivatives such as futures, options, and swaps may not be suitable for all investors. Derivatives trading involves substantial risk of loss, and you should fully understand those risks prior to trading. Any reference to past performance is not indicative of future results. All references to futures/options trading are made solely on behalf of FCStone, LLC. All references to swap execution and bi-lateral swaps are made solely on behalf of INTL FCStone Markets, LLC. FCStone, LLC will clear swaps when applicable. Swaps are only available to eligible counterparties. All observations of economic, political and/or market conditions are not intended to refer to any particular trading strategy, promotional element or quality of service provided by INTL FCStone Inc. and its subsidiaries and should be construed as market commentary. All recommendations to buy or sell a specific derivative or forecasting statements regarding market activity and the pricing thereof should be construed as a solicitation in any jurisdiction in where such an offer or solicitation would be legal. Proper context and guidance including but not limited to the particular trading objectives, financial situations and the needs of the intended audience were taken into consideration when this recommendation was prepared. Contact your account representative for specific advice to meet your specific trading preferences or goals. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by INTL FCStone Inc. and its subsidiaries. Sources of information believed to reliable were used in preparing such observations, and no guarantee or representation regarding the accuracy of those sources has been made. INTL FCStone Inc. and its subsidiaries are not responsible for any redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material.


Prev 1 2 3 4 Next All



Comments (0) Leave a comment 

Name
e-Mail (required)
Location

Comment:

characters left


AG10 Series Silage Defacers

Loosen silage while maintaining a smooth, compacted bunker space resulting in better feed and less waste. This unique tool pierces, ... Read More

View all Products in this segment

View All Buyers Guides

)
Feedback Form
Leads to Insight