Editor’s note: This market commentary is provided by the Dairy Division at FCStone/Downes-O'Neill in Chicago, Ill.
Thursday was a somewhat subdued trade for Class III as volume clocked in at just above 800 contracts on minor price declines with a significant open interest increase yet again.
After opening slightly higher, futures began to lose steam on light news. The concerted effort by the industry to account for ― and dissolve ― the Mad Cow issue may have had a small role in tempering buy side interest. But it was more likely the continued two-sided trade in spot cheese ― and new trading lows in the butter market ― that ultimately prompted Class III futures to challenge the week’s trading lows on many contract months. And it was likely a firming dry whey futures market that held Class III above those lows.
One main issue of trader concern Thursday was the divergent spot market. The block market finished up .25 to $1.5250 yesterday, while barrels lost 2.75 cents to close at $1.42. Over the past few days, the block price looks more and more vulnerable to weakness in the face of a widening spread with barrels. Moreover, fresh cheese supplies are reportedly ample and sellers have product to bring to market. Some anecdotal evidence exists to suggest a somewhat better American cheese demand picture over the past few weeks, but there is not a wall of worry to climb right now. There needs to be some worry for prices to climb.
As for today, we expect a mixed trade early in Class III and Cheese futures. Class IV ought to trade mixed too to start after having taken the brunt of massive price losses yesterday on just five trades. Class IV finished between unchanged and .61 cents lower Thursday.
In the grain complex, those who grow soybeans have a green light on making sales of new crop beans. Meanwhile, corn is testing its recent lows and major support levels; it is a pivotal time.
Corn sales arrived at 645,600 tons, up noticeably from the previous week and 11 percent from the prior 4-week average. Soybeans also were strong with net sales of 926,200 tons, up from the previous week and the prior four-week average.
We look for corn to open 4 to 5 cents higher and for beans to open 8 to 10 higher.
Daily CME spot market prices:
Block cheese: $1.5275 (up 0.25 cent)
Barrel cheese $1.42 (down 2.75 cents)
Butter: $1.36 (down 3 cents)
Grade A NFDM: $1.1575 (down 1 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., International Assets Holding Corporation, 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.