Dairy markets: Last week in review

 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 came under a “small craft advisory” after hitting a rough patch of sea last Friday. The market finished sharply lower after blocks came under heavy fire on the spot market. May-June contracts took the brunt of the pressure; the 2Q 2014 pack lost 52¢ on the session to finish at $22.15/cwt., but managed to pick up 17¢ week over week. The 2H 2014 pack closed at $19.48/cwt., down 1¢ week over week.

Friday’s spot cheese action seemed more about the spread between blocks and barrels than about cheese supply and demand overall, but we see it as foreshadowing of what’s to come in the next 1-3 weeks.

Has the market fallen off the edge of the cliff? The trade sure has that feel to it, but will require subsequent follow-through price weakness to validate a reversal of trend. The fundamental dynamics might be there to justify it. From a domestic standpoint, upticks in production out West and the onset of Midwestern flush is increasing the flow of milk. Granted, it may not be the “wall” of milk many expected, but it’s flowing nonetheless.

From an international perspective, the U.S. has become less competitive on price, as European production has increased and international prices have softened. The latest GDT auction results showed a whopping 8.9% decline in prices, with major buyers noticeably absent for a second consecutive week. This is an “adult-swim-only” market. If downside price risk is a concern, strategies should be implemented to mitigate the possibility of continued selling pressure.

 Class IV futures finished unchanged to lower on Friday, as the market continues to look for price direction amidst weakening NFDM and butter prices on the spot market.

The market has a bearish tone to it, with volume on the quieter side and a steady weakening in prices. These traits are indicative of markets that are about ready to “turn over”. Bear in mind that Class IV led the way to the upside and will most likely lead the way back down. Granted, there are long-term bullish fundamentals in this market, but that doesn’t make it exempt from temporary price corrections.

 

April 4 spot session results:

Block cheese: $2.35 (down 7.25¢)

Barrel cheese: $2.2250 (down 0.5¢)

Grade A NFDM: $1.9975 (unchanged)

Butter: $1.97 (unchanged)

 

Today's expectations:

• Class III to open lower

• Cheese to open lower

• Dry Whey to open soft

• Class IV to open soft

• Butter to open slightly lower

• NDFM to open soft

 

Grain futures

The grain market traded quietly to finish up last week. May corn closed at $5.0175,bushel, while December corn settled at $5.0675/bushel. May soybeans managed to finish a dime off the lows on Friday, at $14.7375/bushel. The November contract closed at $12.085/bushel. Trade is consolidating ahead of the April 9 (11 a.m. Central) World Ag Supply & Demand Estimates report, which will look at domestic and world carryout numbers.

 

Today’s expectation:

• Corn to open soft

• Soybeans to open firm

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


5M Series

Five M Series Models: 5065M, 5075M, 5085M, 5100M, and 5115M (65-115 hp). If you spend a lot of time on ... Read More

View all Products in this segment

View All Buyers Guides

)
Feedback Form
Leads to Insight