Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
Class III was mixed through the first half of 2014, settling anywhere from +1¢ to +22¢ on the day, while the second half settled anywhere from +1¢ to +6¢. March futures saw the biggest move, settling up +22¢, although it is still some 56¢ off its highs set a week ago. Currently the Class III 2014 pack is trading at $19.40/cwt., just 6¢ off its highs.
There's “hand to mouth” buying due to these high prices – mixed with expectations of a seasonal, post-Super Bowl slowdown. The demand picture seems to be good from an export perspective as previous sales continue to move product offshore. Internationally, Australia seems to be seeing more production problems due to excessive heat, while forage quality seems to still be a large concern preceding spring flush. Excessive dry conditions in the Western U.S. are on the forefront of many market discussions as well.
The block price is down 2.50¢ since last Thursday, at $2.33/lb. With barrels down 2¢ yesterday, to $2.30/lb., the spread is 3¢, inside the historical range of 3¢-5¢.
The CME Grade AA butter was down 4.25¢ from last Thursday, at $1.85/lb. USDA weekly stocks were up 8.5% from the previous week, but are 19.1% below last year. Overall it seems that there is a bit of inventory rebuilding; however, cream supplies are tight. Selling activity in the butter market during January decreased from December and was below the 2013 monthly average. After bottoming out at $1.5225/lb. on Dec. 30, the price has settled into a range between $1.88-$1.90/lb. since the peak of $1.94/lb. on Jan. 22.
Feb. 6 spot session results:
Block cheese: $2.33 (up 0.5¢)
Barrel cheese: $2.30 (down 2.0¢)
Grade A NFDM: $2.0175 (up 1.75¢)
Butter: $1.85 (down 3.0¢)
• Class III & Cheese to open slightly higher
• Dry Whey to open mixed
• Class IV & NFDM to open weaker
• Butter to open steady
Corn prices held steady on another strong week of export sales, even as China announced the canceling of 220,000 tons of corn. As of Feb. 1, US corn sales now total a record portion of projected annual exports, and the flurry has is prompting traders to consider even larger corn export potential.
Soybean values surged higher on strong export sales as well. With record South American supplies available in spring, traders continue to look for China purchases to slow.