Market recap: Bearish GDT auction but futures bounce back

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Editor’s note: This market commentary is provided by Curtis Bosma at HighGround Dairy in Chicago, IL.

Class III Futures
Tuesday’s Class III market started off slightly higher in the front months, but after a bearish Global Dairy Trade Auction prices fell back below previous settlements. This downward movement was short-lived as another strong spot cheese session caused futures to bounce back. The August contract held to settled five cents higher, but Sept – Dec settled 5 to 12 cents lower. Volume on the Globex platform was somewhat low as an estimate 937 contracts traded.

Class IV Futures
A bullish day in butter futures along with a sell-off in NFDM futures gave off mixed signals for Tuesday’s Class IV market. Butter futures settled up the limit (UP $0.05) in August and September. NFDM futures settled 1.250 – 2.225 cents lower Aug – Dec. Class IV futures settled 8 to 19 cents higher in Q3, and 10 to 20 cents lower in Q4. This has brought a greater inversion to the market as December futures are priced very far below the front months.

CME Spot
The buying interest in in the spot cheese market continued Tuesday as buyers pushed the price of cheddar barrels higher. One cheddar block traded at $2.0000 bringing both block and barrel prices above $2 for the first time this month. The spot butter market was very active as 13 loads traded with multiple buyers and sellers participating in the session. Spot butter is still at a slight premium to futures, but after Tuesday’s limit up movements in butter futures the price levels could be converging.

CME Spot Price ($/lb.) Daily Change (₵/lb.) CME Futures Price ($/cwt) Daily Change ($/cwt)
Cheddar Blocks  $ 2.0000 + 0.25 Class III (August)  $ 21.02 + 0.05
Cheddar Barrels  $ 2.0325 + 2.75 Class III (Oct - Dec) average  $ 19.55 - 0.09
NFDM  $ 1.7350 N.C. Class IV (August)  $ 22.95 + 0.15
Butter  $ 2.3900 + 1.50 Class IV (Oct - Dec) average  $ 19.88 - 0.07

Disclaimer:  The risk of loss in trading futures and options can be substantial.  Past performance is not indicative of futures results.



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