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

Class III futures finished the week on a soft note, but the market behavior surprised many participants who were expecting a major downside correction at the first sign of spot cheese weakness. The 2Q 2014 pack pulled back 7¢ over the past week to close at $21.98/cwt., while the 2H 2014 pack gave back 18¢, to settle at $19.49/cwt.

Spot cheese prices trended lower. Cheddar blocks closed at $2.3850/lb., a 4.5¢ drop week over week; barrels pulled back to $2.29/lb., a 2¢ decline for the week.

Fundamentally, futures are still trading at a discount to cash, and upticks in production out West have yet to translate into softer prices. The Midwest is still waiting for spring – and the resulting flush – to arrive. Expect prices to weaken upon that realization, which should not be far off.

Cash settled cheese futures posted mixed results, despite the soft tone to the spot market. Dry Whey futures finished the week on a firmer tone, with mixed results in the 2Q, but gains throughout the 2H of 2014.

Class IV futures sprang to life on the heels of a firm spot session for butter. The market tone for butter is quite firm, with strong seasonal demand for Easter/Passover, brisk exports and tight cream supplies, manufacturers are looking to replenish light inventories.  

For the week ending March 15, dairy cow slaughter under federal inspection was down 6.9%, at 60,800 head, compared with the same period the previous year. Year-to-date slaughter levels are 8.5% lower than 2013 levels, with 651,600 head slaughtered..

FC Stone's annual Dairy Outlook Conference will be held June 18-19, in Chicago. Visit www.intlfcstone.com/events for information.


March 28 spot session results:

Block cheese: $2.3850 (down 2.25¢)

Barrel cheese: $2.29 (down 3.0¢)

Grade A NFDM:  $2.03 (up 0.75¢)

Butter: $2.00 (up 1.5¢)


Today's expectations:

• Class III to open mixed

• Cheese to open mixed

• Dry Whey to open soft

• Class IV to open steady

• Butter to open higher

• NDFM to open soft


Grain futures

The grains trade continued to consolidate ahead of the USDA’s Prospective Planting/Grain Stocks reports due out this morning at 11 a.m. (CDT). Most of the week had seen this recurring theme of positioning before the number. Both markets have traded with a firm tone leading up to the report, with decent export activity, continued fund buying and weather concerns.


Today’s expectation:

• Grain complex to open soft


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