Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
After an up-and-down day, Class III futures pushed higher yesterday, driven in part by yet another overall bullish round of GDT auction results.
The Class III futures settled the day with prices ranging from 3 to 15 cents higher as over 1,200 contracts changed hands. The all-contracts GDT TWI increased by 0.6 percent, as declines in the later-dated contracts offset much of the gains seen within those of a closer expiration. The all-contracts AMF, butter, Cheddar SMP and WMP prices all sit solidly above the $2.00, helping to spur our domestic dairy price rally. The strength in the GDT continues to be rooted in the declining milk production rate of New Zealand which, despite recent heavily rains, looks to continue to disappoint heading into their season’s end.
As both Oceania and European milk production continues to struggle on weather-related conditions, the global dairy marketplace will continually look to U.S. based products to offset production woes, supporting prices for the near term.
Spot session results:
Block cheese: $1.87 (unchanged)
Barrel cheese $1.7575 (down 1 cent)
Grade A NFDM: $1.785 (up 0.5 cent)
Butter: $1.77 (up 1 cent)
In the grain complex, turn-around Tuesday was in full effect yesterday as the futures contracts in general stabilized after Monday’s steep sell-off. The May corn contract climbed 16 ½ cents to $6.63 ¼, while the December (new crop) corn contract added 8 ½ cents to settle at $5.40 ¾. The Nov13 soybean contract tested support near the $12.00 level before climbing into settlement to close out up 11 ¾ cents at $12.18 ½.
The slow planting progress to start the season has provided some underlying support for the grains as forecasts call for more rains this week throughout the Corn Belt accompanied by cooling temperatures. The confirmed cases of foot-and-mouth in cows in China, in addition to the bird flu cases, has added unease in the marketplace in regards to continuing Chinese import demand, while the continually high domestic soybean crush rate weighs on U.S. ending stock projections, with both set to play against one another in the upcoming USDA supply and demand report released on May 10.
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.