Dairy markets: A Class III bounce surprise

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

With mounting bearish sentiment for the spot cheese market over the past few trading sessions, the surprise yesterday was the Class III futures bounce. The May contract rallied 45¢ to finish a penny off the highs at $22.29/cwt. June finished up 22¢ at $20.23/cwt. The balance of the contracts finished modestly higher.

While we’ve seen slightly increased producer selling of both Class III and cheese futures over the past several weeks, it appears to us that commercial buyers are still alive and well in both futures markets. The second half of the year is averaging the mid-$1.80s cheese – an attractive number for making additional purchases for many end-users. 

NFDM futures traded as much as 1.50¢ higher. May futures are now running a premium to spot, but there’s a disconnect of about 10¢ between where sellers want to sell (low $1.80s) and where buyers want to buy (low $1.70s) as we move out to June.

Class IV and butter were largely unchanged yesterday.  We expect to see butter supported at current levels as we’ve returned from Easter with largely the same issues of inventory tightness we saw before the holiday (yesterday’s USDA report notwithstanding).

 

April 22 spot session results:

Block cheese: $2.2225 (down 2.75¢)

Barrel cheese: $2.2300 (down 2.0¢)

Grade A NFDM: $1.8575 (unchanged)

Butter: $1.8950 (up 0.5¢)

 

Today's expectations:

• Class III, Cheese & Dry Whey to open firm

• Class IV & NFDM to open lower

• Butter to open steady

 

Grain futures

Corn and soybeans trading changed from docile to volatile as if both markets suddenly "woke up" to smell the fresh fundamentals at hand. Gargantuan export inspections and weather concerns sparked updrafts in corn. When corn hit $5.00/bushel, we had some well-esteemed colleagues call up to ask about the $6.00 level? I believe my response was, “call me back when the shuttle lands!”  First off, there are ample corn stocks and, if near normal growing conditions are realized this year and China continues its policy of rejecting GMO strain MIR-162, domestic stocks will continue to balloon.  Secondly, never underestimate the American farmer, their tenacity and capabilities.

The CME announced new price limits that will go into effect May 1.

 

Today’s expectation:

• Grain complex to open soft

 

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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