Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
Class III prices shrugged off 0.25-cent drop in block cheese and firmed ahead of yesterday afternoon’s USDA August Milk Production report. Trading was only marginally more active than Wednesday with volume falling just shy of 800 contracts. Still, prices rose 5 to 10 cents through the first half 2014 on a mixture of short-term technical bias, as well as what appears to be a growing commercial buy side into 2014. But yesterday’s bearish ― albeit limited ― Milk Production Report for August leaves us questioning whether or not the path of least resistance we’ve seen this week is about to change.
Without milk cow or milk-per-cow data, we’re left to conclude that not only was feed quality and milking conditions in most milk sheds of the U.S. generally better in August, but also, it seems, heifer numbers are materially higher than we expected. The favorable forward curve on corn (we know it’s not the protein or hay markets) has mixed with stable to firm international prices and firming U.S. powder prices to tell the dairy farmer to get up in the morning and add to the herd and don’t forget to increase the quality starches before you call it a day.
Spot session results:
Block cheese: $1.795 (down 0.25 cent)
Barrel cheese: $1.7675 (unchanged)
Grade A NFDM: $1.83 (unchanged)
Butter: $1.53 (unchanged)
Corn is in a holding pattern and lacking news, and the large crop storyline is well factored in until production can be verified. The bean market, on the other hand, is weakening even in the face of strong export sales. Those sales continue to impress, and soybean sales were bigger than expected Thursday ― and this doesn’t include the very large 1.930-million-ton bean sale to China and 182,000-ton sale to unknown announced Wednesday afternoon. Wheat sales last week were also larger than expected at 704,000 tons. Corn sales were a bit less than expected.
We expect that pre-harvest lows are in on corn, so end-users ought to be looking for at least some short-term coverage now. Most end-users are in a waiting pattern themselves with ideas of much cheaper corn to come. We find it hard to argue that point, but it may very well be a 2014 story once we see how South America is progressing and once we close the tax book on 2013.
This morning, we look for corn to open steady to -3 and soybeans 12 to 17 lower.
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