Class III Futures
Tuesday was a very good day to be a dairy farmer. Soybean futures fell as harvest expectations continued to strengthen. The July contract settled at $13.9950 per bushel (DOWN 0.2350). July Class III milk settled up the limit at $21.79 (UP 0.75). Estimated Class III volume on the Globex was at 1,352 contracts. Tuesday’s spike in Class III was almost entirely driven by firmer CME spot prices and a slightly bullish Global Dairy Trade (GDT) auction results. July cheese futures settled at $2.0920 (UP 0.0650) and this market rallied on GDT support where cheese traded 2.4% higher than the previous auction and the overall Price Index settled higher for the first time in four months. Cheese futures are now trading at a premium to the spot cheese market. This could mean that spot prices are poised for additional gains but could indicate that the latest rally may be overdone.
Class IV Futures
More good news for dairy farmers as the butter rally continued during Tuesday’s trade. August butter settled at $2.1150 (UP 0.0325), and the October – December contract average settled at $1.9558 (UP 0.0142). Tuesday’s GDT auction showed additional strength for butter (UP 1.8%). The recent rally has been closing the gap to the spot price but futures still remain at a slight discount. NFDM futures had a slightly bullish day, but with extremely light volume. August – October settled a quarter to half penny higher.
Tuesday’s CME cash session showed us two things. First, it proved that cheese still has some strength. Cheddar blocks traded three times, each time a penny higher, to settle up 3¢. Cheddar barrels traded four times and settled 2 3/4¢ higher. After Tuesday’s GDT results, we might begin to believe that $2.00 cheese has some legs. The second indicator from Tuesday’s cash session was that spot butter continues to see good two-sided trade. 18 loads of butter traded during Tuesday’s spot session. Prices ranged between $2.1600 and 2.2000, but the market ultimately settled at $2.1950 (UP 0.0100).
Wednesday afternoon’s May Milk Production report should provide additional direction to the markets.
Disclaimer: The risk of loss in trading futures and options can be substantial. Past performance is not indicative of futures results.