Class III, Cheese and Whey
The Class III and Cheese markets started off the week by breaking out of their recent ranges and making respectable gains. The 4th quarter pack average gained 24 cents to settle for the day at 19.64, and we saw everything from unchanged out in Sept. of 2015 to up 30 cents in the August of 2014 contract. Volume, while not as heavy as it was last week, still put in a respectable showing with over 900 contracts trading hands. Heat was the major fundamental factor as California, Washington, and Idaho have been seeing triple digit daytime highs with little relief in the nighttime hours. All of which, as our readers know, is tough on cows and leads to lower production numbers. We have also heard of a small decline in production numbers in the Southwest and lower component numbers in the Midwest. With schools back in session in the next 30 to 45 days we could see more push to the upside as that pull for milk could make the domestic picture tight. Before we get ahead of ourselves here, note that we have GDT numbers today and the Milk Production Report for June on Friday. Both will give us better marketplace direction in the medium term and we will reserve judgment until we get the data as a one day up does not a trend make.
click image to zoom Cheese markets up in a pretty positive session when spot Blocks and Barrels were bid this morning right out of the gate on the auction. With Barrel prices edging over the $2.0000 mark again we saw more sellers coming to the market to move physical product. As the Block market tried to play catch-up to get the spread back in line, there was not enough momentum and left that market still inverted with Barrels over Blocks, and still outside of the historical norm of 3 to 5 cents. As we have said through other Update articles, as long as the spot markets stay range bound we will continue to see inverted and tight markets. It will take some type of an event to break us out of this range in Cheese. With manufactures producing to fill orders on the books and seemingly increasing their product in storage, they will have to do more to break us out of the current dynamic. Futures prices ranged anywhere from down 0.2 cents in July 15 contract, to up 3.3 cents in Sept. 14 on steady volume in yesterdays’ session.
Dry Whey futures finally saw a little more action yesterday than in the previous session and notably more action in the 2015 contracts than we have seen in a while. One should consider this as more of a follower overall, and what we saw yesterday could be considered value plays in 2015. Traders will expect to see more of that type of action if the Cheese and Class III markets continue up again today.