Class III Futures
Class III futures continued to sell off after a rejection of the highs reached earlier this week. Although cheese makers are struggling to build inventory, U.S. milk production is on the rise and will continue to put downward pressure on Class III futures. Volume on the Globex platform was slightly lower as an estimated 1,049 contracts were exchanged. There was decent volume through the first half of 2015, which could indicate that producers were locking in prices before the scale is tipped any further. With buy-side interest waning in the spot cheese market, it is hard to foresee a large bounce in the near term.
Class IV Futures
Butter futures continued to fall apart Friday and they took Class IV futures along with them. The butter Aug – Dec contract average settled at $2.1567 (DOWN 0.0223). Class IV futures sold off in the front months. Aug – Oct contracts settled 11 to 35 cents lower. Although Class IV futures have seemed bearish the past few days it is important to remember that butter stocks are still low than usual and buyers will have to come in and provide support sooner or later.
Friday brought more bearishness to the spot market as the cheese and butter sessions were both seller dominated. One cheddar block traded at unchanged during the cheese session, but sellers had more in their pockets and offers dropped 1.75 cents in the blocks and 4.5 cents in the barrels before finding any support. The butter session was fairly quiet as a lone seller dropped a one lot offer down three cents before a buyer bought a load. Although the spot butter market showed a bit of weakness Friday the weekly average price of spot butter settled at $2.5840 (UP 0.1670).
Disclaimer: The risk of loss in trading futures and options can be substantial. Past performance is not indicative of futures results.