Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
An actively traded spot cheese session yielded softer price action, but failed to provide much of an indication as to where this market is headed.
Future direction will be influenced by a culmination of spot movement, technical indicators, GDT auction results, and the Milk Production Report scheduled for release on Wednesday. The market is anticipating a modest uptick in production. The question at hand is whether or not any increased production will be sufficient to mitigate demand, both domestically and from an export standpoint?
The behavior in the futures market is reinforcing the bullish undercurrents that have supported this market for months. For a technical perspective, the July contract has been well supported by its 10-day moving average at $20.78/cwt., followed closely by its 20-day moving average at $20.65/cwt.
Spot cheese market saw the most actively traded session for blocks since May 7. The block-barrel spread remains outside the historical normal range of 3-5¢, and there seems to be no sense of urgency to correct it. For the time being, this market will likely remain is such a state until supply outstrips demand.
Cheese futures continue to trade lock-step with the Class III market, and in thin trade, tacked on gains throughout the balance of 2014, with the August and September contracts putting in fresh contract highs along the way.
The dry whey market saw limited action to start the week, with prices remaining stable and hovering at, or near, clusters of moving averages. The whey stream is benefitting from increases in cheese production, and will likely experience pressure as a result.
On the heels of a firm butter market, the Class IV market shot out of the blocks to start the week, tacking on impressive gains through January 2015. The June contract soared to an all-time high of $22.88/cwt., with double-digit upside price movement in deferred months. Despite an unchanged spot butter session, the futures market continued its aggressive upside price movement reflecting tightness in the marketplace. With ice cream demand vying for available cream supplies, rebuilding inventory levels have been challenging and, considering it’s a time of year where these levels are typically restored, one has to wonder if the butter market’s legs are preparing for a marathon.
June 16 spot session results:
Block cheese: $2.0200 (down 1.0¢)
Barrel cheese: $1.9600 (down 0.75¢)
Grade A NFDM: $1.8250 (unchanged)
Butter: $2.1850 (unchanged)
• Class III, Cheese & Dry Whey to open firm
• NFDM to openmixed
• Class IV & Butter to open steady
A swath of red was cut through the grain markets to open the week, as strong export inspection numbers and a decent soybean crush number did nothing to thwart the bears. There’s nothing bullish about this corn market at the moment, as near ideal growing conditions, long funds selling and fallout from the Chinese announcements that they will cease issuing import permits for U.S. DDGs all continue to add pressure to this slumping market. July corn lost 6¢ to settle at $4.41/bushel, and December shed 5.5¢ to settle at $4.42/bushel.
The soybean market took heat yesterday, with the July contract shedding 4¢ and closing just above its 100-day moving average at $14.13/bushel.
• Grains to open soft
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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