Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
Class III settled mixed yesterday, with the July-December 2014 pack now trading near $19.55/cwt., 13¢ of the high of $19.68/cwt.
We have been saying since January we suspect this market collapses in April/May, most likely late May. The fundamentals still seem to support a firm tone, but the technical indicators show signs of an eventual collapse being taken early. Still the spot market will garner most attention, and cheese tightness there has yet to fully play out, which could be supportive of futures today.
The February 2014 milk production report was neutral in comparison to what was expected. Internationally, production seems to be within seasonal norms. Australia weather is a bit dryer than normal; March to May New Zealand rainfalls are likely to be near normal. All eyes continue to be on El Nino watch, as the NOAA has raised their alert from “non-active” to “watch.”
Class IV futures are chopping amidst a NFDM market that seems extremely topped out on spot, but futures remain in bull mode and will do so even after spot makes its inevitable move lower – likely not for some time (May). Fat is tight around the globe, and while the U.S. isn’t cheap by global standards anymore, it is still the most readily available and in hot demand. Butter remains bullish and futures remain choppy to steady in the near months, but bullish in the back months..
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March 19 spot session results:
Block cheese: $2.42 (up 2.0¢)
Barrel cheese: $2.3050 (unchanged)
Grade A NFDM: $2.04 (unchanged)
Butter: $1.9050 (up 0.5¢)
• Class III to open lower
• Cheese to open lower
• Dry Whey to open steady to higher
• Class IV, Butter & NFDM to open steady
Grain markets closed higher again yesterday. The 200-day moving average corn futures price continues to provide a strong support level with resistance coming in at $5.00/bushel. Export numbers remain brisk and, if gone unchecked, could propel the yellow giant to higher levels. Soybeans posted strong gains for a third straight session. The tight old crop balance sheet is an explosive dynamic and verified by the latest crush numbers.
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