Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
The downward slide on Class III futures continued Tuesday as light volume early-on saw futures down double-digits in nearby contracts prior to the spot cheese trade.
The spot market continued to see multiple sellers, and they kept the downside pressure on Class III futures as the block dropped by a penny and the barrel fell by 2.5 cents. Though volume remained light, totaling just 715 trades on the day, prices continued to fall and June finished the day down 23 cents; July down 17; Aug down 13, and other months mostly lower but mixed from +2 to -10.
Activity does seem to be a bit on the slow side this week as the market participants seem to be stepping to the sidelines now that we’ve corrected the wide block/barrel spread as they attempt to determine the direction of the next move.
A slow grind to the downside has been seen in the international markets over the past few weeks, and that continued in the EU, according to our weekly report. It seems the story is much the same there as it is in Oceania with a softening market but a tight supply and demand keeping participants on their toes. Supply is better domestically, but most participants seem to agree it won’t take much of an increase in demand or a slowdown in milk production to throw our markets out of balance.
Spot Session Results
Block cheese: $1.76 (down 1 cent)
Barrel cheese: $1.73 (down 2.5 cents)
Grade A NFDM: $1.68 (unchanged)
Butter: $1.595 (unchanged)
In the grain complex, sharply lower prices turned mixed as the day saw things slowly grind their way higher. Spreads continue to trade actively and be very volatile. Yesterday, it was old crop corn falling, down 9.5 cents in July to 640, while new crop prices pulled out of the early hole to close unchanged at 520.25. Meanwhile, July beans finished 13.75 higher to 1478.25, while new crop November closed down 4.25 at 1220.75.
With planting mostly expected to wrap up over the coming week to 10 days, all eyes are likely to look ahead to summertime weather.
The trading of derivatives such as futures, options, and swaps may not be suitable for all investors. Derivatives trading involves substantial risk of loss, and you should fully understand those risks prior to trading. Any reference to past performance is not indicative of future results. All references to futures/options trading are made solely on behalf of FCStone, LLC. All references to swap execution and bi-lateral swaps are made solely on behalf of INTL Hanley, LLC. FCStone, LLC will clear swaps when applicable. Swaps are only available to eligible counterparties. All observations of economic, political and/or market conditions are not intended to refer to any particular trading strategy, promotional element or quality of service provided by INTL FCStone Inc. and its subsidiaries and should be construed as market commentary. All recommendations to buy or sell a specific derivative or forecasting statements regarding market activity and the pricing thereof should be construed as a solicitation in any jurisdiction in where such an offer or solicitation would be legal. Proper context and guidance including but not limited to the particular trading objectives, financial situations and the needs of the intended audience were taken into consideration when this recommendation was prepared. Contact your account representative for specific advice to meet your specific trading preferences or goals. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by INTL FCStone Inc. and its subsidiaries. Sources of information believed to reliable were used in preparing such observations, and no guarantee or representation regarding the accuracy of those sources has been made. INTL FCStone Inc. and its subsidiaries are not responsible for any redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material.