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

 Class III futures prices reversed course and edged modestly higher yesterday. Stronger dry whey futures along with firming spot cheese prices underpinned the strength. Cheese futures prices, which have been moving in lock-step with Class III most of the week, finished mixed yesterday with slight strength in nearby contracts; November 2014-January 2015 finished lower. 

Both the Class III and cheese trade have seemingly shrugged off a weaker global price situation yet again this week, as participants focused on continued robust U.S. demand for cheese and higher overnight temperatures out West.  But these markets look a little overbought at current levels so we expect the potential for a downward correction to start in August.

The strength in dry whey futures is somewhat surprising, given that supplies in the country appear more than adequate. While we can’t argue with strength as it is happening, we expect to see more whey production – not less – in the coming months.
Spot butter offers continued, as an orderly decline for butter prices has been the feature all week.  The question we’ve been asked is: Where is the bottom?  So far, this is a pullback on the price of butter – not necessarily the start of a trend lower.  Our expectation is for the spot price to ultimately take us back into the $2.30/lb. range. 

Year-to-date dairy cow slaughter levels are 10.4% lower than 2013 levels.

 

July 31 spot session results:

Block cheese: $1.9775 (up 0.25¢)

Barrel cheese: $1.9875 (up 4.0¢)

Grade A NFDM: $1.6500 (down 2.5¢)

Butter: $2.4400 (down 3.0¢)

 

Today's expectations:

• Class III & Cheese to open mixed

• Dry Whey to open steady

• Class IV & Butter to open steady

• NFDM to open mixed

 

Grain futures

The grain complex closed out July mixed, as a confluence of factors was at play.  The corn market succumbed to the prospects of beneficial rains forecast beginning this weekend, with the heavy rainfall totals projected for Monday through Wednesday. Yesterday’s weekly export sales report showed strong results for the new crop, with old crop corn sales lackluster in comparison.

The soybean market pushed higher in the nearby contracts, off the strength of old crop export sales, while the new crop contract inched higher in sympathy, as the improving weather forecasts would be beneficial for pod development.  
 

Today’s expectation:

• Corn to open lower

• Soybeans to open lower

 

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