Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
Class III and cheese futures bounced handily Thursday in light of already deep discounts futures carry to the spot market. The spot cheese market is providing a good dose of uncertainty to the current trade. There was the expectation that once block cheese showed up at the exchange the decline in spot prices would be anything but orderly. So far that has not been the case. We hear that blocks are snug in the country and, because of that, perhaps we see only moderate declines – or even some stability – going into April. But we would be remiss if we did not point out that spot prices for U.S. cheese are the most expensive in the world right now. That doesn’t mean we have to fall out of bed today or tomorrow, but it does mean that we ought to not only expect pushback from the international market, but also the potential to begin importing cheese again in the next few months if global prices remain on their current weakening track.
Dry whey futures turned lower Thursday trading unchanged to 1.22¢ lower through December. Dry whey futures remain in a more of a sideways trade.
Class IV futures firmed up a little Thursday, courtesy of a stronger butter market. Butter remains likely the tightest market of the dairy complex right now, as demand for cream has been strong and stocks of domestic butter are very tight. Spot butter looks poised to make $2.00 lb. in the near-term, which ought to keep futures well-supported for the time-being. Meanwhile, NFDM continues to feel sluggish and mostly sideways now.
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March 27 spot session results:
Block cheese: $2.4075 (down 1.5¢)
Barrel cheese: $2.32 (down 1.0¢)
Grade A NFDM: $2.0225 (unchanged)
Butter: $1.9850 (up 1.5¢)
• Class III & Cheese to open mixed
• Dry Whey to open steady
• Class IV, Butter & NDFM to open steady
Corn futures finished near the top end of their recent range – just below $5.00/bushel. The market is consolidating recent gains ahead of next Monday’s USDA Grain Stocks and Prospective Planting reports. There is some chatter of further erosion of corn acres in favor of soybeans, with some folks even throwing out corn acreage expectations below 90 million acres. The average pre-report guess is 92.748 million acres. We suspect it will be lower than the average guess, but not lower than 90 million acres. Meanwhile, corn futures look poised to take out the $5.00 level. Soybeans and bean meal continue to flirt with recent highs, in part due to uncertainty surrounding USDA’s upcoming reports. Also, there has been continuing rumors this week that South American bean sales are being rerouted towards the U.S. by Chinese buyers (no confirmation of this).