Editor’s note: This market commentary is provided by the Dairy Division at FCStone/Downes-O'Neill in Chicago, Ill.
In our opinion, Friday’s milk production report was slightly bearish. Total milk production was slightly stronger than anticipated due to both a slight increase in cow numbers and milk per cow. While none of the estimates were substantially different than estimated, each was slightly bearish.
Twenty-three state milk production was up 2.5% vs. October 2010 which was just above our estimate for a 2.1% increase. It seems doubtful this report will have a major impact on futures prices given the severe discount still being seen between spot and the futures market but it will be a negative influence if an impact is seen. The 9,000-head growth in cow numbers seen from September also is a bit surprising given that slaughter rates since Sept. 17 have been higher by 2.4 to 7.6% each week year over year.
Last week, both blocks and barrels breached the $2.00 level, but both closed the week well below that mark. For the week, blocks lost $0.1175 with a loss of 15 ¼ cents of Friday. The barrels didn’t fare much better, losing $0.1375 on the week, with a 12.5 cent loss to close out the week. While the spot market took heavy losses Friday, the Class III futures rallied in a feeble attempt to close the spread between futures and spot prices.
Corn futures were down to end the week, with exports looking bleak. After being down nearly 4% on Thursday, the market rallied early Friday, then sold off, plus some suspected technical selling. With demand slowing abroad, the market has reflected that exact sentiment. End-users were out all week as many seemed to push the market down covering shorts, hitting the 4 month low. Soybeans were fairly flat and with a choppy trading day on Friday finished steady. Current prices are a good reflection of fair market, foreign interest has come back into the market, especially China. Exports and international demand still look towards the economic woes as the uncertainty reins.
One thing we can’t happen home enough: A futures market will turn the corner when it makes little sense to do so, trying to anticipate future value — not current value.
We look for corn to open 8 to 10 cents lower and beans to open 11 to 14 lower.
Daily CME spot market prices:
Block cheese $1.8325 (down 15.25 cents)
Barrel cheese: $1.87 (down 12.5 cents)
Butter: $1.6475 (down 2 cents)
Grade A NFDM: $1.45 (up 0.5 cent)
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