Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
Friends, dairymen, dairy processors and traders in between, lend me your ears (and eyes). There are those that would have you believe the bull move is passed in dairy, and bear claws lie ahead. There are those that would have you believe it is time to sell, but we caution you to moderate your opinions for that is what the market is doing for you ― moderating. Every bull must breathe; every bull must pause, take drink and catch its breath. Every bull that lives will charge again!
The July Class III chart shows the contract month well off its highs, but only now at support. The price has softened, but has only come down to the 38% Fibonacci retracement level. We expect support to come in either now or at the 50% level about another 20 cents below. The price got ahead of itself and profits had to be taken, but much of the price decline has been on much lighter volume than the price incline from before and we put more stock in volume and believe you should, too.
Yesterday, Class III and cheese futures prices opened down and eased off their lowest levels of the day with more volume coming on the uptick than the downtick.
There is market place discomfort with the width of the block/barrel spread, but as people become more comfortable with that, and the pull of powder remains, then we should see more tightness in milk and cheese supply and price. This doesn’t mean farmers should be protecting, there are options choices available that still have attractive margin choices when coupled with corn and meal, but we feel strongly that the price break is providing good opportunity for end-users to protect future purchases now.
Spot session results:
Block cheese: $1.915 (up 0.5 cent)
Barrel cheese $1.735 (up 0.5 cent)
Grade A NFDM: $1.7475 (unchanged)
Butter: $1.645 (down 0.5 cent)
Location, location, location…. Wait, this isn’t real estate it’s grain trading: weather, weather, weather, and the USDA.
Corn prices were off to a plummeting start on fresh weather reports with better planting prospects and stayed that way all day yesterday as exports inspections added some fuel to the fire sale. After the close, planting progress was released and we have planted 12 percent of the corn crop vs. 5 percent last week and 47 percent on average and 69 percent last year — but Iowa and Illinois are both below 10 percent. Beans were unchanged from last week at 2 percent vs. 2 percent last year and 12 percent on average.
The markets overnight are trying to rebound a little bit from yesterday’s pressure. It’s hard to get a trend going this time of year because of the flurry of weather reports and planting expectations, so it’s much easier to think short term and from a contrarian point of view.
This morning, we look for corn to open 3 to 5 cents higher and beans 5 to 10 higher.
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