Class III, butter rally

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

Class III prices jumped higher early on, led by nearby months June and July quickly climbing to near 20-cent gains pre-spot. Volume was heavy before the spot session trade with nearly 500 contracts. After the spot market traded, futures tried to climb, gaining nearly 30 cents but were quickly pushed back toward 20 cent gains when the spot butter market took off and raised prices higher yet again. Prices held their sharply higher levels for the remainder of the session settling just off of the daily highs. Contracts from June through November were all up at least 13 cents to as much as 37. With two consecutive days of gains in the spot market, the Class III market felt comfortable, adding premium back into the market.

Now the question becomes will we set new highs on this move?

At this time, that feels unlikely as there just doesn’t seem to be quite enough momentum to push prices above those previous highs. Perhaps the milk production report released this afternoon can provide the ammo needed or perhaps buyers will continue to be aggressive in the spot markets. We are just skeptical that, given the reported balance in the market, availability of cheese, strong spring flush and schools letting out soon that this is the time.

Cash cheese prices were higher in line with the Class III market, but volume was light in comparison as just 32 contracts traded on the day. Futures from June through December were higher by 0.004 to 0.032 cents. July through August futures are now nearing the 1.80 mark.

Grain prices started out the session stronger, only to look as though they would turn negative yesterday with the dollar posting gains and softer outside markets before rallying back mid-morning. The usual suspects were the biggest reason for the comeback: slow planting in Ohio and North Dakota, dry weather in the European Union wheat areas, basis remaining strong, and flooding along the Mississippi River, which will likely result in lost acreage as well as causing the Coast Guard to close the lower Mississippi River.

Forecasts showing no rains in dry European Union areas over next 14 days, so little relief is likely for now. Grains seem likely to remain well supported by production concerns, despite sporadic trading in outside markets mostly weighing upon the market.  

We look for corn to open 4 to 7 cents higher and beans to open 4 to 6 cents higher.

Daily CME spot market prices:

Block cheese: $1.655 (up 2.5 cents)

Barrel cheese: $1.6525 (up 0.75 cent)

Butter: $2.075 (up 7.5 cents)  

Grade A NFDM: $1.6300 (no change)

 

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.

Source:  FCStone/Downes-O'Neill


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