Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
The Class III market started off yesterday’s session on a more positive note for the 2013 contracts with the Sept. and Oct. continuing the trend from last week to the upside.
The early action was mainly due to a report that the New Zealand company had exported four nitrate-contaminated consignments to China. It seems that none of these consignments made it into production and the nitrate was one that is common in cleaning products. The initial investigation is showing that the contamination came from a pipe that was not properly flushed after cleaning, leading to the contamination. This story, however, had a short-lived effect on the Class III markets coming into the spot session, as we saw a huge turn to the downside on lower offers for blocks and barrels. The Sept. and Oct. contracts both lost ground, closing down -.43 cents to 17.80 and down -.46 cents to 17.77, respectively. The 2014 contracts seemed to take everything in stride, as no major moves occurred through the session leaving them mixed anywhere from up +.03 for the April 2014 contract to down -.07 for the May and August 2014 contracts.
The stark moves down in the 2013 contracts may have also been a bit of a precursor to the July Milk Production report we received last afternoon. We are calling the report bearish as actual numbers for U.S. production and the 23-state production numbers beat estimates higher.
The spot session, while lower on the day for blocks and barrels, saw no trading ― just lower price offers. Blocks settled down 2 ¼ cents to 1.7550 and barrels settled down 3 cents to 1.7350, still keeping the spread just outside of the historic three- to five-cent range.
Eyes will be on today’s spot session to see if the declines in blocks and barrels continue in the wake of yesterday’s reports. The bear move domestically seems destined, the question is when, and will it come now or in a couple months post normal seasonal demand? With weather good for production and Asian demand for whey consistently described as weak, we might see the bear move sooner rather than later whereas we had originally predicted it for late year. .
Spot session results:
Block cheese: $1.755 (down 2.25 cents)
Barrel cheese: $1.735 (down 3 cents)
Grade A NFDM: $1.795 (unchanged)
Butter: $1.36 (down 1 cent)
What a turnaround day for the grains! It appears we have turned a corner here and can expect some higher prices near-term for both corn and beans to start off the week. Export inspections for corn were lower than estimates, but both beans and wheat were higher, giving a lift to all grains across the complex.