Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
Market bulls found inspiration from the spot cheese session, as barrels expanded the price advantage over blocks to 4.5 cents. August through November Class III contracts posted the strongest gains. Conversely, the 1Q 2015 Class III pack continues to find itself in a bearish position. Fundamental pressures are growing, as the recently announced Russian ban on dairy products from Western nations may indirectly drive domestic prices lower. Roughly 70% of Russian imports of cheese were from Western nations now barred from trade. These nations must now look to other markets to export their product – markets where the U.S. would now compete for market share. Dry whey tallied numerous trades on the day, resulting in mixed prices.
Class IV futures remained mostly unchanged to start the week, failing to draw much inspiration from the divergent results of NFDM and butter spot markets. The spot butter market provided an early head fake, pushing lower to start the session, before buy-side interest drove the market a penny higher; 16 loads traded. This trading activity drove butter futures between 1.25¢ and 4.3¢ higher in the August through November contracts. NFDM futures, on the other hand, slipped lower in August through October 2014 after the spot Grade A price fell 2¢.
August 11 spot session results:
- Block cheese: $2.09000 (down 1.0 cents)
- Barrel cheese: $2.1350 (up 1.25 cents)
- Grade A NFDM: $1.5200 (down 2.0 cents)
- Butter: $2.4100 (up 1.0 cents)
- Class III to open higher
- Cheese futures to open higher
- Dry Whey to open steady
- Class IV to open steady
- NFDM to open lower
- Butter to open steady to higher
Grain markets saw pre-report positioning ahead of today’s USDA Crop Production and World Ag Supply & Demand Estimates reports. Talk of droughts curbing China’s potentially record corn production added to the bullish sentiment on the day. USDA’s weekly Crop Progress report pegged the corn crop at 73% good/excellent, unchanged week over week, but 9% better than the corresponding week last year.
The August soybean contract rocketed higher ahead of its Thursday expiration, fueled by old-crop supply tightness. The weekly Crop Progress report pegged the soybean crop at 70% good/excellent, 1% lower from the week before, but still 6% higher than during the corresponding week last year.