Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
The Class III market worked its way higher throughout Thursday’s session, as the spot market showed some resilience after the recent declines. Cheddar blocks gained 3.75¢, while barrels fell 2.0¢, pushing the spread to 19.25¢ at the close. This is now approaching the 23¢ spread seen last May 1, which ended with blocks falling sharply.
The current Class III equivalent using spot market values is about $24.27/cwt., and with the gains yesterday, futures are playing catch up. Settlements ranged from 20¢ to 34¢ higher from April through July, and the remainder of 2H 2014 was also strong. The July-December average closed at $19.63/cwt., a gain of 15¢. Some of the gains in Class III were also the result of stronger dry whey prices.
Class IV futures were mostly unchanged. NFDM prices actually strengthened slightly yesterday following the recent declines. Cash settled butter futures were mostly lower, as the spot butter market closed lower for the second consecutive day. It seems futures are buying into the sentiment that prices will dip following the Easter holiday demand.
Weekly cow slaughter came in at 58,300 head, down 9.5% year-over-year, and leaving us 8.6% below 2013 year-to-date.
April 3 spot session results:
Block cheese: $2.4225 (up 3.75¢)
Barrel cheese: $2.23 (down 2.0¢)
Grade A NFDM: $1.9975 (unchanged)
Butter: $1.97 (down 1.5¢)
• Class III & Cheese to open firm
• Dry Whey to open soft
• Class IV to open steady
• Butter & NDFM to open mixed
Grain markets rebounded from Wednesday’s sharply lower session. Corn closed higher with forecasts continuing to predict a wet start to the planting season. Soybeans closed higher, as China continues to buy U.S. cargoes while canceling South American cargoes, leaving South America with a record carryout.
• Corn to open soft
• Soybeans to open steady to higher
FC Stone's annual Dairy Outlook Conference will be held June 18-19, in Chicago. Visit www.intlfcstone.com/events for information.
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.