Milk and cheese futures in midst of decline on CME

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

The decline continued yesterday and into the evening session. Milk and cheese futures are in the midst of a parabolic decline ― determining when it will end is like catching a falling knife, and we have not enough band-aids or health insurance with Obamacare to play that game. But when it does end, it will likely turn on a dime.

In short, bear spreads continue working and are probably the safer approach to shorting this market. End-users continue to tell us that mid-Q3 pricing is attractive, but they are not buying U.S. product for domestic needs with any aggression, and more than one cheese company has told us that this month has been the slowest of the year. 

Spot Session Results

Block cheese: $1.6875 (unchanged)

Barrel cheese: $1.6575 (down 2 cents)

Grade A NFDM:  $1.73 (unchanged)

Butter: $1.4675 (down 0.75 cent)

In the grain complex on Tuesday, corn was relatively steady with old crop gaining on new crop for the first time in a few sessions. Volatility was moving higher across most option contracts as traders brace for impact from Friday’s report. It was the first time in four trading sessions that old crop beans put in a higher day. The U.S. dollar was firm, as were equities, so no real direction from the outside markets. Weather remains mostly positive in the short term; the market is unlikely to make any major directional moves before Friday’s report release, then watch out, particularly for beans. Overnight, the grain markets opened mixed with corn slightly higher, while soybeans and wheat were moderately lower.

This morning, we look for the grain complex to open mixed with corn and wheat steady to 5 cents higher, while soybeans should open 5 to 10 lower.

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