Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
Market participants were seemingly caught off guard Thursday, as Class III rallied sharply after spot cheese reversed course and closed north of $2.00/lb. for the first time since May 12. Cheese futures also rocketed higher after the 6¢ gain in both spot blocks and barrels. Dry whey futures closed out the trading day mixed.
Class IV contracts settled mostly higher for the day. Butter futures faced a series of bullish factors. The bullish rally was set in motion during the flourish of trading activity during the spot session, and the strength of the price gains continued into the end of the day after the release of April’s Cold Storage report. Butter stocks were estimated to have decreased by 3.3% from the month prior, but even more substantial was the stocks are now estimated to sit almost 44% below last year’s level. Butter contracts should continue to find buy side interest heading into the holiday weekend, and possibly for the coming weeks, as market participants must contemplate addressing their supply needs in the face of dwindling supplies, ahead of seasonally declining milk production during the face approaching summer months.
NFDM markets settled mixed, but mostly higher. Despite the weakness displayed in the international prices, domestic prices continue to rise independent of these outside forces and should continue to trade steady to higher in the near term.
May 22 spot session results:
Block cheese: $2.0200 (up 6.0¢)
Barrel cheese: $2.0200 (up 6.0¢)
Grade A NFDM: $1.7925 (unchanged)
Butter: $2.1700 (up 0.75¢)
• Class III, Cheese & Dry Whey to open mixed
• Class IV, Butter & NFDM to open firm
Soybeans were the catalyst for a volatile trading session. The soybean contracts surged higher after yet another strong showing in export sales figures. The corn market found bullish legs in the early trade, backed by talk of 1 MMT of corn selling quickly in China’s first weekly reserve auction. Heightened internal corn prices in China could lead to additional export demand later this summer, once GMO issues are resolved. Domestically, weather issues continue to delay planting progress in the northern five states in the Corn Belt, with some forecasts calling for rains in the comings days that would continue to impede field work in these areas.