Dairy markets: Last year, in reverse

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

  Cheese futures, on soaring volumes, stole the spotlight for a second day. Both cheese and Class III futures markets saw prices rally in nearby months, but fall in back months. Traders are feeling almost compelled to bring up front months on surprising spot cheese price strength, but allowing back months to linger or fall on anticipation of eventual price declines.

Since last Thursday, the block price is up 12.25¢ at $2.10/lb. There have been 12 trades. The barrel price is 13.50¢ higher at $2.1225, with 6 trades. The spread is -2.25¢, outside the historical range of 3¢ to 5¢. USDA weekly stocks were up 0.1% from the previous week, but are 21.0% below last year.

Let’s think back to late last year. Global dairy prices rose rapidly, but the U.S. lingered and left us wondering when or even if the U.S. would participate in the global rally. When it did, powder rallied first, followed much later by cheese. Now global dairy prices have and continue to fall. Powder prices in the U.S. have fallen and are falling still. Cheese is lagging down – as it did on the way up – but the follow through should almost certainly be the same.

NFDM futures volumes took off yesterday, with almost 400 trades as prices plunged hard. Spot fell another penny; the bullishness attached to this week’s CWAP is ancient history, overshadowed by GDT, U.S. inventory and falling spot prices. 

Butter futures also saw strong volume, but a mixed trade. Nearby months were well supported and, oddly enough, already steeply discounted deferred futures finding selling pressure. Someone out there is forecasting a major 2015 price collapse in butter.

Spot butter was active once again with 9 trades for the second consecutive day, but prices were unchanged, despite seeing early spot session price pressure. The CME Grade AA butter was down 4.0¢ from last Thursday at $2.40/lb., with 26 loads traded. USDA weekly stocks were down 1.3% from the previous week, but are 22.3% above last year.

 

August 7 spot session results:

Block cheese: $2.1000 (up 1.0¢)

Barrel cheese: $2.1225 (up 1.5¢)

Grade A NFDM: $1.5600 (down 1.0¢)

Butter: $2.4000 (unchanged)

 

Today's expectations:

• Class III & Cheese to open firm

• Dry Whey to open steady

• Class IV to open soft

• Butter & NFDM to open lower

 

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