Monday's CME Dairy Market Recap

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Editor’s note: This market commentary is provided by Curtis Bosma at HighGround Dairy in Chicago, IL.

Class III Futures

Class III futures continued to sell off Monday after another bearish spot cheese market. Contracts settled 9 to 18 cents lower through the rest of the year. Volume was very light today as only an estimated 963 contracts traded on the Globex platform. The bearish news in the spot cheese market had very little effect on cheese futures. Contracts traded lower through the end of the year, but prices were all within a penny and a half of Friday’s settlements. Cheese futures are now at a slight premium to spot prices, but the only a few cents separate the two markets.  Whey futures continued to slide downward Monday. The August and September contracts settled at 63.9000 (DOWN 0.3500) and 60.7500 (DOWN 0.7500) respectively.  This slight sell off in Class III is still viewed as a correction. There is no need for producers to hit the panic button, but it is a good time to be looking at the margins that can be locked in through the end of this year.

 

Class IV Futures

A bearish spot NFDM market, followed by a very bullish spot butter market left Monday’s Class IV market with mixed inferences. The front months moved slightly higher, but fourth quarter contracts were unchanged to 14 cents lower. NFDM futures sold off following the spot market. The July – September contract average settled at 1.7858 (DOWN 0.0088). Butter futures rallied limit higher (UP 0.0500) in both August and September, and showed lots of strength through the end of 2014. Spot butter still remains at a significant premium to futures, which could have more upside potential.

 

CME Spot

Offers came right out of the gate in the cheddar blocks during Monday’s spot cheese session. Four blocks traded, each time slightly lower to bring the market two cents lower on the day. Spot NFDM continued its bearish trend from last week moving down two and a half cents before a buyer bought a load. Bidding activity in the spot butter market started early as bids came in and brought the market over three cents higher before a seller offered a load 11 cents above Friday’s settlement. Bidders continued to work their way up before one eventually bought that load at $2.5000 (UP 0.1100).

Monday’s USDA crop report brought some good news for dairy producers as planting numbers for both corn and soybeans were on the higher end of their projected estimates. Corn and soybean meal futures sold off sharply shortly after the report.

 

Disclaimer:  The risk of loss in trading futures and options can be substantial.  Past performance is not indicative of futures results.



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