Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
Class III futures resumed their bullish trend, marching higher across the board and posting a record close for the February contract at $22.92/cwt. All contracts through 2014 finished in the green on light volume, with the exceptions being November 2014 and January 2015, closing unchanged. The Q1 pack rallied a dime to close at $21.63/cwt.; the Q2 pack closed higher by 12¢ to finish at $19.28/cwt.; and the 2H of 2014 picked up 4¢ to close at $18.18/cwt.
As long as buyers keep coming for cheese, sellers step aside, resulting in higher spot prices. Fundamentally, the bullish undertones dominating this market for much of the last three months are still very much intact. Surplus milk continues to be diverted into the dryers for powder, firm international prices continue steady to higher. Persistent global tightness in the supply chain, with fresh cheese becoming a scarcity, are all contributing factors.
The ramifications of international demand, specifically from China, have been played out in the Class IV futures market since late summer. It will be interesting to see how the upcoming Chinese New Year celebrations at the end of the month will impact the market on a short-term basis. Their absence from the marketplace may be just what it takes to get this market to break and correct itself a bit. However, with fundamentals as strong as they are, any realized price weakness will most likely be met with a fresh round of buying from those who have either previously missed the market or have been priced out of it.
Jan. 28 spot session results:
Block cheese: $2.32 (up 1.0¢)
Barrel cheese: $2.28 (up 0.5¢)
Grade A NFDM: $2.075 (up 2.5¢)
Butter: $1.90 (unchanged)
• Class III, Cheese & Dry Whey futures to open mixed
• Class IV & NFDM to open mostly higher
• Butter to open mixed
Grains traded mixed yesterday, with corn continuing to oscillate within its recent range. South American weather is turning a bit friendlier. Maybe, with the obliteration of the value of Argentina’s peso and exports right on USDA’s pace, corn can find an excuse to do something, with the path of least resistance possibly to the upside on a short-term basis. Strong soybean export numbers continue to impress, but are battling against what is expected to be a record crop coming out of Brazil.