Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
Last week’s selling pressure continued to depress cheese and Class III futures prices during yesterday’s trade. June through September Class III finished Tuesday’s post-holiday trade between 3 and 13 cents per cwt. lower, while fourth-quarter futures settled steady to 3 cents firmer. The June through December 2013 Class III futures average finished down a nickel to $18.44 per cwt. The average still remains above last week’s low of $18.38, yet that support level is expected to once again be tested this week.
Block cheese settled ¼ cent firmer on the spot market to $1.755 per pound with a single load exchanging hands. Two bids were left on the board at the settlement price. Buyers, however, appeared to practice restraint, leaving an offer at $1.76 on the board. Barrels were non-active at $1.7225 per pound. In our opinion, the unwillingness to push the market higher is a bit telling. Buyers, in general, appear to be comfortable acquiring cheese in the mid-$1.70’s, yet are in no rush to inflate prices. Milk production throughout the Midwest and Southwest continues to go about unabated, while, at the same time, offers of fresh cheese production continue to circulate trading desks.
Spot Session Results
Block cheese: $1.755 (up 0.25 cent)
Barrel cheese: $1.7225 (unchanged)
Grade A NFDM: $1.68 (unchanged)
Butter: $1.545 (down 0.5 cent)
Wet weather, with many areas across NE, IA, SD, MN and IL getting 2 to as much as 6 inches of rain, as well as a rainy forecast for the next 10 days, supported corn and soybean futures Tuesday. Corn futures for July settled up 9.25 cents at $6.665 and for December up 14.5 cents at $5.51. Soybean futures for July gained 33 cents to $15.0925 and for November jumped 40.25 cents to $12.88 per bushel. The market now has some technical upside momentum as it traded through some moving averages and saw some late-day buying interest.
After the close, planting progress was released and as of May 26, 44 percent of the U.S. soybean crop is in the ground ― a 20-percentage-point jump from the previous week and slightly ahead of estimates for 42 percent. As of May 26, 86 percent of the U.S. corn crop has been planted, compared to the five-year average of 90 percent planted at this time ― in line with expectations. Overnight, the market had a subdued reaction to the planting progress reports, opening within a few cents of unchanged.
This morning, we look for grains to open steady to slightly lower across the board.
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.