Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
The choppiness of the Class III market continued. The second and third quarters both gained ground, but we lost ground mainly in the February and March contracts by the time it was all said and done. The fresh cheese market is trying to find some semblance of stabilization after the recent drop in physical prices. Another active spot session for both blocks and barrels led to a correction in the spread (barrels down 11.75¢/lb.) between the two to more of a historic norm. Cheese futures took all of this action in stride and wound up just slightly mixed. Whey markets were quiet.
Class IV contracts showed some signs of recovery on the back of higher butter and NFDM prices, with gains all the way out to October 2014. This could signal the end of the downward correction in the Class IV market, but a two-day “up“ does not a trend make. NFDM markets moved higher on a slight increase on the spot market. Front-month contracts tested recent highs, and we will be looking to see if we get a breakout in the coming session, or if we continue to be pinned in the same range we have been in since Jan. 17. Butter markets slid slightly on the spot session. The futures markets wound up mixed. The market is at “oversold” levels and we could see a pop up from current prices in the near term. This is what one would call the proverbial tipping point. We could go up, we could continue down, but the downside at this point appears limited.
Feb. 12 spot session results:
Block cheese: $2.1050 (unchanged)
Barrel cheese: $2.0625 (down 11.75¢)
Grade A NFDM: $2.0550 (up 0.75¢)
Butter: $1.75 (down 1.5¢)
• Class III & Cheese to open steady to lower
• Dry whey to open mixed
• Class IV, Butter & NFDM to open steady slightly higher
Grains were mainly lower overall, pinned down by a higher U.S Dollar and higher crude prices. Corn futures ended up mixed, with the March contract down 1.5¢, to $4.40/bushel, and the December contract up 2¢, to $4.5775/bushel. Beans had a choppy day as well. A cancelation by China on a sale of 272K tonnes of old crop beans was the culprit on a move lower, even though they did announce another sale of 240K tonnes of new crop beans at the same time.
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