Dairy markets: Class III loses steam (for now)

 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 finally lost steam yesterday: weakness was seen in most months with the exception of January and February 2015. 2014 contracts settled the day anywhere from -8¢ to -15¢, while 2015 ended the day +3¢ to -10¢.  While blocks did move another penny higher, it seems that some of the bullish momentum has been lost, at least for now.

So why the Class III retreat?  Bulls have been firmly in control for the last two weeks. However, it was only a matter of time before the market corrected itself. While it may be too early to tell if this correction is only a small pullback – before another move higher – the market does feel a bit top heavy at these levels. We saw this type of run back in June.

Today, the fundamental picture is a bit different. Weather concerns have passed, production is seasonally declining and supplies continue to be tight, which has been the case for some time. Bulls can point to the school season getting into full swing; bears can point to slowing exports, and Oceania ramping up production.

Should the market see a serious correction, one should not discount another bullish run, but this one-day pullback is not indicative of a serious correction, nor a change in trend yet. It is a sign, however, that the impressive two-week run may have been overdone.

Both NFDM and Class IV futures saw significant gains through 2014. While butter slipped in the spot session, futures saw a quick turnaround, with plenty of buy-side interest pushing spot off its intra-day low.

 Fundamentally little has changed in NFDM and butter. Butter remains tight as demand exceeds current inventories. While NFDM has seen a bounce as of late, the market continues to have a weak tone.  However, it is too early to tell if this is a reversal or a short-term bounce. 

 

August 27 spot session results:

Block cheese: $2.3000 (up 1.0¢)

Barrel cheese: $2.3000 (unchanged)

Grade A NFDM: $1.32250 (up 2.25¢)

Butter: $2.7400 (down 1.5¢)

 

Today's expectations:

• Class III to open lower

• Cheese to open lower

• Dry Whey to open steady

• Class IV to open mixed

• NFDM to open lower

• Butter to open firm

 

Grain futures 

The corn session was quiet yesterday as traders digest reports of huge yields in conjunction with an expanding southern harvest. Weekly ethanol stocks were down 5% from last week and at the lowest levels seen in months. Soybeans have seen large swings. Traders are still expecting national yields to be higher, with more-than-ample August rains.

 

Today’s expectation:

• Corn to open steady to higher

• Soybeans to open higher

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


Biotal Forage Inoculants

"Biotal offers a range of forage inoculants proven to help win the battle to preserve feed quality and value. Call ... Read More

View all Products in this segment

View All Buyers Guides

)
Feedback Form
Leads to Insight