Dairy markets: Block-barrel spread tops 19¢

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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¢)

 

Today's expectations:

• Class III & Cheese to open firm

• Dry Whey to open soft

• Class IV to open steady

• Butter & NDFM to open mixed

 

Grain futures

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.

 

Today’s expectation:

• 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.

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