Editor’s note: This market commentary is provided by the Dairy Division at FCStone/Downes-O'Neill in Chicago, Ill.
Regardless of the soap opera-like drama that has become the spot market over the past week, we understand there is more fresh product freeing up in the country this week.
For now, the best way we can characterize the spot market is “in balance” when in the mid $1.50 range ― not over $1.60. Block cheese closed at $1.6025 on Wednesday.
Although pontificating what the spot market might do in a week or two is akin to predicting the weather, we expect that the market should chop around the mid to high $1.50 average for the balance of the week. As such, we expect a choppy to lower trade on Class III and cheese futures as those prices attempt to converge some with spot.
Meanwhile, the U.S. dollar got crushed ― now almost a full $1 off recent highs. Energy, equities all rallied big time. Add to that a dry weather week, and still a lot of on-farm corn storage reluctant to go to elevators, keeping cash solidly priced, and we bounced in what still appears to be a larger bear market.
Grain prices will remain highly volatile in the next few weeks ahead of any earlier than normal pollination. Traders are trying to measure the impact of a general lack of rain and whether or not it will result in the USDA adjusting corn yields lower than the record 166- bushel-per-acre corn yield and 43.9 bu/acre soybean yield.
We look for corn to open firm and for beans to open 3 to 5 higher.
Daily CME spot market prices:
Block cheese: $1.6025 (up 2.25 cents)
Barrel cheese $1.5225 (unchanged)
Butter: $1.405 (down 0.5 cent)
Grade A NFDM: $1.19 (unchanged)
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