Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
The Class III futures market looked as though it was ready to reinforce the bear case early yesterday, but gains in blocks sent 2014 futures skyrocketing. The cheese price turnaround even boosted first half 2015 contracts.
But the massive gain in milk production reported by USDA after the close pushed prices below yesterday’s settlement price levels, indicating some weakness likely to start today’s session. The milk production estimate will certainly increase interest in the marketplace. While this report was without question bearish, we do have to keep in mind that this data is now some 20 days old. Generally, you’d expect to see some weakness ahead of the report, which we seem to have shaken off to this point.
Certainly the market doesn’t have to look far for bearish sentiment (GDT, milk production, NFDM, international prices) but we’ve not succumbed to the pressure as of yet. Perhaps the milk production report will be the final piece of debris that breaks the dam?
Cash settled cheese futures were mostly higher in line with the Class III. The dry whey market pulled back after trading mostly higher in recent sessions.
Class IV futures saw a relatively limited reaction to the GDT report. Prices were steady to higher from Aug.-Dec. 2014, and lower from Jan.-March 2015. The spot butter market continues to lead the way, moving 2.5¢ higher yesterday. Futures prices were mixed but mostly higher, as GDT saw AMF and butter advance 3.6% and 4.9%, respectively. Prices look to be very strong through the holiday demand period, but it just seems to be a question of when, not if we pull back, and how far that pullback can take us.
August 19 spot session results:
Block cheese: $2.2100 (up 2.5¢)
Barrel cheese: $2.2100 (unchanged)
Grade A NFDM: $1.3650 (down 1.0¢)
Butter: $2.6600 (up 2.5¢)
• Class III to open sharply lower after declines in overnight trading
• Dry Whey to open lower
• Class IV to open mixed
• Butter to open mixed
• NFDM to open lower
Grain markets traded to a mixed close on Tuesday as they recovered from overnight losses. There was little fresh news to create movement, but the Ukraine flour milling association requested that the government halt exports until crop quality could be determined, and rains in the Upper Midwest are reportedly threatening spring wheat quality as well. Those two items led to a wheat rally, which pulled corn along.