Dairy markets: Dairy markets take a beating

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

Cheese and Class III milk went from the favorite student to the bad boy in class, with the Class III bull being pummeled hard over the last two trading sessions. Heavy volume in cheese futures and Class III milk are coinciding with the price declines, and increases in open interest support the bear arguments.

We don’t see this as a justified panic scenario; some premium coming out of the market will allow a carry market. With spot cheese holding below $2.00/lb. again yesterday, we increase in our belief that it will likely be many months until we see $2/lb. again.

If anyone had the whipping stick taken out on them it was butter futures, again – limit down August through December 2014 and February, March and May 2015. We will have expanded limits tomorrow. Spot butter fell 5¢ to $2.40/lb., but many futures had already been given a swirly (yes, you know what that is) before spot even traded.

Although NFDM spot was steady, futures were soft and, as a result, Class IV got taken out back behind the shed. Class IV traded near limit down in Q4 2014. Class IV is still the premium to Class III, but the bear is bigger in Class IV, with butter appearing more topped out than ever and NFDM chopping at best.                                               .

 

July 2 spot session results:

Block cheese: $1.9725 (down 1.5¢)

Barrel cheese: $1.9850 (up 0.75¢)

Grade A NFDM: $1.7700 (unchanged)

Butter: $2.4000 (down 5.0¢)

 

Today's expectations:

• Class III & Cheese to open mixed

• Dry whey to open steady

• NFDM, Class IV & Butter to open lower

 

Grain futures

The December corn market continued to sag as the trade starts to realize we could be in for a record crop. As we move into the 4th of July weekend with the crop better than the proverbial “knee high” status, we could see lower prices coming into next week. Traders also continue to realize the likelihood of a large rebuilding of soybean stocks this year, and we should continue to see more negativity in the market.

 

Today’s expectation:

• Grains to open slightly firm

 

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