Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
The weakness in Class III was short-lived, as the market made some slight gains yesterday. While 2014 did show some strength, deferred contracts moved slightly lower in most months. Currently, the July through December 2014 pack is trading near its high at $21.31/cwt. The 2015 pack is trading at $18.42/cwt.
Dry whey futures settled steady throughout 2014 on rather light volume, while the 2015 futures settled mixed. July-September 2014 and July-December 2014 packs are trading just off recent highs. While we should expect to see some price increases along seasonal lines, supplies are increasing.
While butter futures continue to trade at a bit of a discount to spot, we must remember that although stocks are 51.4 million lbs. below the 5-year average, both 2012 and 2013 saw stock levels near or at record levels, perhaps skewing that average just a bit. Although butter is not abundant, we do have at least 30 days of supply on hand. The most recent Cold Storage report reflected a stronger-than-expected increase in stocks, along seasonal lines.
NFDM news continues to be mixed on the supply side.
June 26 spot session results:
Block cheese: $2.0400 (up 1.5¢)
Barrel cheese: $2.0500 (up 0.75¢)
Grade A NFDM: $1.8075 (down 1.75¢)
Butter: $2.3575 (up 0.75¢)
• Class III, Cheese & Dry Whey to open steady to mixed
• NFDM & Class IV to open mixed
• Butter to open steady
The grain complex has become more quiet this week, with excellent growing conditions leading to a bearish outlook. Still, price losses have been somewhat limited ahead of next Monday’s Quarterly Stocks report. The report is viewed as a “high risk” because USDA can, and often does, serve up surprises. While it is hard to make a bullish case for corn – and even harder for soybeans/soybean meal – we do make a case for owning some level of price protection ahead of these reports depending on your individual situation. When the debate is 166 or 168/bu. yields for corn or 44 or 46/bu. for soybeans, it is easy to become complacent and expect weaker prices. At this point, we expect weaker prices – but we’ll protect against the higher.
• Grains to open mixed
FC Stone's annual two-day Dairy Outlook Conference begins today in Chicago. Visit www.intlfcstone.com/events for information.