Dairy markets: Spot butter hits 43-month high

 Resize text         Printer-friendly version of this article Printer-friendly version of this article

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

Class III futures started off the holiday-shortened week with a bang, as prices rallied across the board. The nearby June and July contracts garnered the most interest, rallying 72¢ and 74¢, respectively. Not to be overlooked, every Class III contract from July to December made new contract highs.   

Dry whey futures finished mostly flat on very light volume. Chatter in the country is of dry whey remaining somewhat snug, but what we would call largely in balance for now. We look for mixed trading action on dry whey today with an increase in volume.

Butter futures took center stage yesterday, as the discounted futures market erased some of the steep discounts to spot.  Then spot butter went up again.  Spot butter is now at its highest price since October 2010, when the market peaked at $2.2325/lb.  It’s also 12.25¢ below its all-time high of $2.3750/lb. reached back in 2004, on the heels of the first case of BSE in the U.S. and a plethora of herd retirement programs.

If it is not clear by now, butter prices have taken the weight of carrying Class IV to lofty levels.  The question is for how long?  We expect that butter prices in the mid-$2.20s will free up some butter in the short-term.  However, cream demand remains strong, and weather issues this summer could keep the butter market tighter than expected for longer than expected, unless we see more imported fat from the European Union.

NFDM came along for the ride in a somewhat reluctant fashion.  Commercial buyers see value in the forward curve, but they’re not buying more than they need, and they don’t seem to be too willing to pay up aggressively for it.

 

May 27 spot session results:

Block cheese: $2.0200 (unchanged)

Barrel cheese: $2.0325 (up 1.25¢)

Grade A NFDM: $1.7975 (up 0.5¢)

Butter: $2.2500 (up 7.0¢)

 

Today's expectations:

• Class III, Cheese & Dry Whey to open mixed

• Class IV & Butter to open mixed

• NFDM to open steady to higher

 

Grain futures

Grains again traded lower Tuesday as planting continues along a solid pace and is hitting expectations amid largely friendly growing conditions. Eventually we see more risk to the downside for corn.  There seems to be little fundamental reason for a rally in new-crop beans right now, but the old-crop balance sheet could keep selling at bay until the market feels it has bought enough acres. We still look for more weakness on beans than on corn moving forward this week.

 

Today’s expectation:

• Corn to open lower

• Soybeans to open 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.


Prev 1 2 Next All



Comments (0) Leave a comment 

Name
e-Mail (required)
Location

Comment:

characters left


644K Hybrid Wheel Loader

The 229 hp 644K Hybrid Wheel Loader from John Deere utilizes two sources of energy: diesel and electric. The machine’s ... Read More

View all Products in this segment

View All Buyers Guides

)
Feedback Form
Leads to Insight