Dairy markets: We’ve seen this movie before

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

Class III futures started the session off on positive footing, but buying interest faded quickly despite upticks in the cash cheese market. The Q2 2014 pack gave up 32¢ to close at $20.24/cwt., with the back half of 2014 average trimmed by 8¢, to close at $18.84/cwt. Are we experiencing the first hints of the winds of change blowing here? An argument can be made for seasonal price softening with California experiencing an early flush, coupled with the anticipation of improving weather in the Midwest moving forward. But, we’ve seen this movie before, and yesterday’s selling pressure can be chalked up to profit taking in an overall bullish market. That said, we expect more downside correction today.

Cash settled cheese futures responded to the sentiment in Class III, with losses incurred from March out through the August contract, and only September and December posting mild gains. Dry Whey started the session in the red and had no reason to climb out of it. Losses were seen from March through October, with December posting the lone gain for the session.       

Class IV futures continued to post gains on the heels of international demand for powder product. Gains were realized from April through December, with July up the most. Nonfat Dry Milk futures continue to be well supported.  Butter futures traded mixed with weakness realized in the nearby months, a firmer tone in the mid part of the year, and weakness in the fourth quarter.

FC Stone's annual Dairy Outlook Conference will be held June 18-19, in Chicago. Visit www.intlfcstone.com/events for information.

 

Feb. 25 spot session results:

Block cheese: $2.19 (up 0.75¢)

Barrel cheese: $2.1775 (up 0.25¢)

Grade A NFDM:  $2.07 (up 2.25¢)

Butter: $1.7950 (down 0.5¢)

 

Today's expectations:

• Class III, Cheese & Dry Whey futures to open lower

• Class IV & Butter to open mixed

• NFDM to open lower

 

Grain futures

Exports and fund buying continue to dominate the price action in the grain trade, with May soybeans again leading the way to the upside. Look for continued support under this market that may continue well into the South American harvest. December corn has put in a bottom. Corn bulls are looking for a supply problem, but it will be a challenge to talk about a supply problem without a weather problem. Even without the record crop USDA is forecasting, ending stocks are probably going to grow or at least remain above those of last year. But normally – and outside of the past several years – weather markets tend to flame up on the “possibility” and burn out on the “reality” and we’re not that far in front of our next weather market.

 

Today’s expectation:

• Corn & Soybean futures to open mixed

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