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

After a midweek breakout to the upside, the Class III futures market coiled into consolidating trade to finish last week as the market seems to be a bit leery on where to head next.

Fundamentally speaking, production in the Midwest has steadily been on the rise, yet has come up short of really impressing. There is talk of surplus milk ramping up cheese production, and that has many scratching their heads as to why the rally last week. Despite slight upticks in milk production, it is possible that it’s been too modest to satisfy demand, from both an export standpoint as well as domestically. Is it too little, too late? The resiliency of the market and how buoyant it’s been is an indication that the bullish undertones that have brought us to these levels remain intact. 

Cash settled cheese futures traded in sympathy with the Class III market all week and posted gains throughout the balance of 2014, as well as seeing upticks in hedging activity well into the first half of 2015.

Class IV milk futures continue to trade at lofty levels amidst conflicting signals from the NFDM and butter markets. NFDM futures continue their fight to find fair value and search for identity amidst a domestic market that is rumored to have adequate inventory and an international market that has slumped over the past few months. Despite an unchanged spot butter session that left the price at $2.1850/lb., the butter futures market finished out the week on a strong note, with all contracts through April 2015 closing in the green, and July 2014 through October 2014 posting limit up gains, on what continues to be a market that has garnered much attention of late and displays bullish fundamentals that have been impressive to say the least. With stocks on the lower end of the range and competition for cream supplies to rebuild inventory coming from strong demand for ice cream products, the tone has been set for tightness and well supported bullish undercurrents that could ripple well into the balance of 2014. .


June 13 spot session results:

Block cheese: $2.03 (unchanged)

Barrel cheese: $1.9675 (up 1.0¢)

Grade A NFDM: $1.8250 (down 3.25¢)

Butter: $2.1850 (unchanged)


Today's expectations:

• Class III to open mixed

, Cheese to open mixed

• Dry Whey to open mixed

• NFDM to open firm

• Class IV to open steady to higher

 • Butter to open to open steady to lower


Grain futures

The grain markets saw a mixed trade to close last week, with corn and soybeans firming into the weekend. Near ideal growing conditions and fund selling have hampered the corn market and despite being technically oversold, the recent bounce in prices have been blunted by the $4.50 level for both the July and December contracts. Though exports remain brisk, the announcement that China will not be issuing import permits for US DDG’s (dried distiller grain) as a result of the GMO strain MIR-162 showing up in recent shipments, does not add any bullish fodder to the equation here. 
The soybean market finished the week with modest gains after suffering a “beat down” in trade earlier in the week.


Today’s expectation:

• Corn to open higher

• Soybeans to open higher

• Soybean meal to open mixed


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


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