Dairy markets: Class III follows cheese lower

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

USDA forecasts a record high all-milk price of $21.20/cwt. in 2014 and, if realized it would be the third year in the past four that all-milk price has been over $20.00/cwt.

In trading yesterday, Class III values moved lower following a steep decline in blocks and barrels. Recent cheese highs are unquestionably turning buyers off. The market has run into some resistance at these highs, and we’ve seen a weekly decline last week, the first since the beginning of 2014 last week. However, in light of yesterday’s spot activity futures reaction was muted. The March contract saw the biggest decline, settling -22¢, while the remaining 2014 contracts settled anywhere from +2¢ to-11¢. With spot currently valued at $22.02/cwt., the spread between the March contract and the spot value has rapidly corrected but still has a fair bit of work to do, one way or the other.

Dry whey futures weakness is evident in the second half of 2014, with the July contract now trading nearly 5¢ off recent January highs. 

Butter futures settled anywhere from unchanged to -2¢, with spot butter posting yet another decline. Sitting below $1.80/lb., the competitive price advantage U.S. processors have over their counterparts in Oceania and Europe has solidified even further. While domestic demand is in a bit of a lull from a seasonal perspective export interest continues to drive sales. NFDM prices continue to soften. Initial indications are that buy-side interest should re-enter to provide support somewhere near the current spot market pricing, right around $2.00/lb.

 

Feb. 10 spot session results:

Block cheese: $2.13 (down 10.25¢)

Barrel cheese: $2.15 (down 5.5¢)

Grade A NFDM:  $2.0175 (unchanged)

Butter: $1.7650 (down 3.0¢)

 

Today's expectations:

• Class III to open mixed to lower

• Class IV, Butter & NFDM to open mostly lower

 

Grain futures

Corn values saw a lackluster response to USDA’s World Ag Supply & Demand Estimates report, while soybean values moved lower. Some mumblings  are suggesting that U.S. corn plantings will be down 2.3 million acres this spring, with soy acreage up some 5.2 million acres.

 

Today’s expectation:

• Corn to open mixed

• Soybeans to open lower

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