Editor’s note: This market commentary is provided by the Dairy Division at FCStone/Downes-O’Neill in Chicago, Ill.
Friday’s Class III session was an active one as the spot cheese market activity picked up. Blocks, surprisingly, dropped 6.5 cents to $1.76 ― the lowest price seen since early August when blocks jumped a dime in just three days. On the day, volume was just shy of 1,000 contracts. And prices were lower in line with the spot losses, but, interestingly, climbed well off of their lows into the close. December finished down 33 cents to 18.74; January lost 13 cents to 18.79, but the remaining 2013 contracts were mixed from -5 to +5 on relatively light volume. Given the severity of the drop in spot prices, we would’ve expected to see futures fall even more sharply than they did, but the market seems to believe that the activity was indicative of a spread correction between the blocks and barrels more so than an indicator of further price declines to come.
The first quarter of 2013 futures pack ended the week at the price of $18.79 with a total gain of 15 cents for the week. While the Q1 pack moved higher, the December contract dropped by 47 cents on the week. We’d look for a cautious trade to open the week ahead of the spot session this morning. While the market generally seems to be in balance at the moment, we expect to see some buying interest return to the spot cheese session in light of the interest late Friday and sizeable price drop that has been seen of late. Falling prices should lead to better demand in short order, and the market will be looking for confirmation of that in the form of continued forward physical sales and support for Class III futures.
For the week ending Nov. 17, dairy cow slaughter under federal inspection increased by 1,000 head week over week to total 65,300 head. The year-to-date slaughter has reached 2.732 million head, 6.4 percent higher than during the same period last year and up 6.2 percent YTD.
The grain markets were interesting last week as early week strength gave way to a late-week selloff on futures. Friday’s session saw corn fall 3.5 cents to 748; soybeans down 8.5 to 1432.5, and wheat down sharply by 22 cents to 863.5. Despite a relatively wide range of trading prices, corn closed up just 2.5 cents on the week at 748 on Friday; soybeans saw a much sharper gain of 20 cents for the week to close at 1438.75, and wheat actually closed lower by 3 cents on the week at 844.76 after trading up to 876 earlier in the week. The late-week drop in prices saw grains fall from medium term resistance and, for the time being, kept prices well within their trading ranges as the first attempt at a breakout move failed. Fundamental news remains fairly light as the market looks ahead to the Jan USDA S & D report along with ending stocks. Sunday night grains opened sharply higher, led by soybeans which traded to 20+ cent gains; corn jumped by 8 cents, and wheat by 10 cents.
We look for corn to open 6 to 9 cents higher and beans to open 12 to 18 higher.
Block cheese: $1.76 (down 6.5 cents)
Barrel cheese $1.7125 (down 2.75 cents)
Grade A NFDM: $1.5575 (unchanged)
Butter: $1.60 (down 1.25 cent)
These data and comments are provided for information purposes only and are not intended to be used for specific trading strategies. Commodity trading is risky and FCStone Group, Inc., INTL FCStone Inc., and their affiliates assume no liability for the use of any information contained herein. Although all information is believed to be reliable, we cannot guarantee its accuracy and completeness. Past financial results are not necessarily indicative of future performance. Any examples given are strictly hypothetical and no representation is being made that any person will or is likely to achieve profits or losses similar to those examples. References to and discussions of exchange traded products are made solely on behalf of FCStone, LLC. References to and discussions of OTC products are made solely on behalf of INTL Hanley, LLC, and OTC products are only available to eligible counterparties.