Dairy markets: Will U.S. follow GDT lower?

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

Class III and cheese futures shrugged off the bearish results of the latest GDT auction to climb higher on the day, in spite of a quiet spot cheese session. The majority of the gains were seen in 2Q 2014 contracts.  

The 4Q 2014 cheese contracts have seen an increase in trading over the past several sessions, culminating with yesterday’s spike in volume. The increase in activity could be a combination of commercial buying, profit taking and also some producer hedging, yet the volatility in these contracts has been muted.    

Class IV futures pushed lower on the back of weakness in the NFDM sector: the spot Grade A NFDM price fell below $2.00/lb. for the first time since Nov. 25 of last year; combined with the sharp declines in the SMP and WMP prices during the GDT auction.

The butter futures market finished the day with mixed prices; the spot butter price tacked on a penny to $2.01/lb.

Remember, the bull market hit the international markets before the U.S. markets, and powder led the way before cheese caught on. The international markets are now leading the way lower, with powder at the forefront. Butter appears fundamentally justifiable to remain the least weak of the dairy legs for some time to come.

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

 

April 1 spot session results:

Block cheese: $2.3850 (unchanged)

Barrel cheese: $2.25 (unchanged)

Grade A NFDM:  $1.9975 (down 3.25¢)

Butter: $2.01 (up 1.0¢)

 

Today's expectations:

• Class III to open soft

• Cheese to open soft

• Dry Whey to open steady

• Class IV to open lower

• Butter to open firm

• NDFM to open lower

 

Grain futures

Grain markets settled with mixed results following results of Monday’s Prospective Plantings report.  The corn market pushed higher as the outlook for a decline in acreage is weighed against demand forecasts.  Soybean contracts surged higher as strong export demand continues to require higher prices to curtail sales amid an already tight supply.

Today’s expectation:

• Corn to open soft

• Soybeans to open higher

 

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