Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
The spot cheese market took center stage yesterday, narrowing the block-barrel spread to 9¢. The market is seeking some sort of equilibrium in the low-$2.00/lb. price range. Fresh cheese is available, but the question seems to be: Do you want to pay for it? Cut/wrap operations continue to fill holiday needs. Near-term domestic demand is keeping domestic prices above world prices. We’d expect the block market to stay over $2.00/lb. for the balance of the week, potentially making a mild move back to the upside sometime next week. But the longer-term fundamentals continue to look bearish.
The spot butter market fell another 3¢, to $1.77/lb., with no trace of buyer interest. The November futures settled limit down to $1.78/lb., hinting towards even lower cash prices in the short term. Class IV futures traded mixed.
The spot NFDM market settled unchanged. Given about 40% of our NFDM is traditionally exported, traders suggest our domestic spot prices should continue to drift lower, as we are not competitive in the export markets.
There has been talk that China is still sitting on big inventories of milk powders. According to several public company financial reports, sales there have been sluggish recently.
Oct. 28 spot session results:
Block cheese: $2.1000 (down 4.0¢)
Barrel cheese: $2.0100 (up 8.75¢)
Grade A NFDM: $1.2400 (unchanged)
Butter: $1.7700 (down 3.0¢)
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Soymeal futures failed to sustain a strong overnight rally, closing slightly lower on the day. Soymeal has been driving the grain markets, so as goes meal, so goes corn, wheat and soybeans. Rain caused harvest delays, and logistical issues stemming from tight rail capacity have caused the market to add significantly over the last 2 weeks.
Weather is now cooperating and harvest is rolling along this week, so expect significant work to get done this week.
The market is beginning to prepare for the Nov. 10 USDA report. Many believe we could see corn carryout as large as 2.3 billion bushels. A stocks-to-use ratio of that size would suggest much lower prices.
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