Dairy markets: Last week in review

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

  It was an up-and-down week for Class III futures, as a busy week of reports and spot cheese movement pulled the market in all kinds of directions. Despite strong weekly gains in spot cheese (blocks were 10¢ higher; barrels gained 12.25¢), Class III futures didn’t follow along. August was up 30¢ on the week, but September was 3¢ lower, and the 4Q 2014 pack was down 24¢, closing the week at $19.83/cwt. The 1H 20155 pack finished the week at $18.07/cwt., down 20¢  from the week prior. The market seems to see milk shifting back toward cheese production in the coming weeks, providing some lower pricing for spot eventually.

Dry whey futures finished the week on a mixed note. The 4Q 2014 pack finished at 62.333¢/lb. We’ve heard little in the way of fresh news on the whey market. With the weakness being seen in many other dairy products, we’d look for some weakness to creep into the whey market as well.

Class IV futures continued their selloff on Friday. The 4Q 2014 pack finished 64¢ lower, at $19.24/cwt.; the 1Q 2015 pack fell 53¢, to $17.83/cwt. The Class III/Class IV spreads have corrected sharply, with December Class IV now $1.20 below Class III. It will be an interesting week for the Class IV market, as NFDM prices look like they may continue to be under pressure, while the October and November butter contracts look to have some significant upside if the spot market doesn’t move lower.

NFDM futures were under the gun. The 4Q 2014 pack fell by 6.475¢, to $1.51833/lb. There was a lot of talk of discounted sales, and the CME spot market fell 11¢ on the week. With the international prices under significant pressure, NFDM looks to be the market most affected.

Butter futures finished the week on a mixed note, with prices mostly lower in nearby months. The spot market was a near repeat of the action seen the previous days, with the price moving lower before eventually coming back to unchanged. We’ve reached a point where it’s difficult to see prices really tailing off ahead of the holiday demand season. There is certainly more cream floating around, but bulk butter still is reportedly very tight, and that’s keeping the spot market from falling.

 

August 8 spot session results:

Block cheese: $2.1000 (unchanged)

Barrel cheese: $2.1225 (unchanged)

Grade A NFDM: $1.5400 (down 2.0¢)

Butter: $2.4000 (unchanged)

 

Today's expectations:

• Class III to open steady to higher.

, Cheese futures to open steady to slightly higher.

• Dry Whey to open mixed

• Class IV to open steady to lower

• NFDM to open steady

• Butter to open slightly lower

 

Grain futures 

The grain markets finished the week mixed, with corn and wheat down sharply; soybeans were slightly higher in the deferred contracts, but sharply higher in the nearby months.

The soybean market continued to find some support from the export market. Soybean meal sales were extremely strong on Thursday.

Rains were good last week, but will certainly be welcomed if they come this week so the crop can finish out as strongly as it has started.

The market will continue to keep an eye on the Russian/Ukraine situation, but we’ve also got the August USDA report coming tomorrow.   
 

Today’s expectation:

• Grain complex to open mixed but mostly higher, with old-crop soybeans the upside leader

 

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