Class III futures ‘tap the brakes’

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

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

Class III milk futures tapped the brakes yesterday despite another spot session that saw gains. Losses in the futures market were heaviest in the first half of 2014, with the first half pack shedding 24¢, and the March contract down 45¢ to settle at $20.60/cwt.
Both blocks and barrels gained 2.75¢, settling near five-year highs.
Look for some spread convergence to continue near-term between nearby cheese futures and Class III months vs. deferreds.


The question is whether or not yesterday’s disconnect between the spot market performance and the futures market behavior was a short-term correction, profit-taking or a reversal of trend? With futures still trading at a discount to spot, this has the feel of profit-taking, and maybe a “wait and see” approach to what should be a post-Super Bowl seasonal softening.


Cash-settled cheese futures settled mixed through 2014, with the first half closing in the red through June, and the second half closing from unchanged to slightly better on decent volume. The first half pack shed 0.01¢ to finish at $1.9827/lb.


USDA’s Cold Storage numbers came out after the close and are construed as neutral to bearish for cheese, but bullish for butter, although much of the data “may already be baked into the cake.”
This morning, we look for Class III, cheese and dry whey to open higher. We look for Class IV, butter and NFDM to open soft.

Jan. 22 spot session results:
Block cheese: $2.27 (up 2.75¢)
Barrel cheese: $2.425 (up 2.75¢)
Grade A NFDM:  $2.0850 (down 1.75¢)
Butter: $1.94 (up 7.0¢)


Grain futures
The grain complex traded both sides of unchanged yesterday in an uneventful session. March corn continues to struggle, with moving averages between $4.25-$4.30/bushel, decent export numbers and bearish fundamentals. Our neighbors in Argentina continue to battle with less-than-ideal weather conditions in their growing season. Are we seeing a temporary bottom being put in here? The fundamentals suggest not, however it is starting to feel as though some of the selling pressure is easing which would be supportive.


The soybean market stalled following the sharp losses it experienced on Tuesday. Exports remain robust, with cumulative bean inspections through 20 weeks of the 2013/2014 marketing year stand at 1.041 billion bushels, a record pace. Technically speaking, Tuesday’s debacle breached some pivotal moving averages that will now act as resistance levels between $12.90-$13.00/bushel.

Grains look to open higher across the board this morning.

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 Hanley, 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.



Comments (0) Leave a comment 

Name
e-Mail (required)
Location

Comment:

characters left


RB4 Series Balers

The Case IH RB4 series balers, including the RB455 silage baler, consistently build dense round bales, even in varying crop ... Read More

View all Products in this segment

View All Buyers Guides

Feedback Form
Leads to Insight