Negative undertones spill into Class III market

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Editor’s note: This market commentary is provided by the Dairy Division at FCStone/Downes-O'Neill in Chicago, Ill.

Negative undertones from Wednesday spilled over into the Class III market Thursday on slightly heavier trading volume. The nearby months posted not only the lion’s share of the 1,437 contracts that exchanged hands, but also the biggest losses for the day. 

September to December prices have flattened out and are edging towards a more bearish cost-of-carry structure. The market appears to be shrugging off the heat and the ensuing milk production losses we’ve baked into prices so far and favoring instead to pay heed to the lull in demand we typically see this time of year. This could mean more downside price action in the near-term. 

In less bearish news, the combined influence of high beef and feed prices and, at best, razor-thin margins on the dairy continue to promote strong weekly cow-slaughter figures. For the week ending July 14, U.S. cow slaughter was reported at 57,000 head, up 10.5 percent for the same week last year. 

Corn futures settled into a bit of a choppy trading dynamic, while soybeans got slammed this week as a wetter forecast has come to fruition for some of the Corn Belt. Iowa and Missouri received some very welcome rains during the past few days, which have taken some of the edge off the worry in the market.  But it may only be a reprieve, as the lack of meaningful rains in other areas will keep traders worried about Monday’s crop ratings and eventual harvest yields.

Don’t forget that today is option expiration for August grain options.

Meanwhile, demand for corn is taking a bit of a beating as prices rushed to new all-time highs last week.  Old crop net corn sales were actually a reduction of 9,100 tons. New crop sales were reduced by 131,300 tons as China (and another reported unknown destination) pushed back on purchases.

Soybean sales did okay, however, as old crop sales were reported at 193,200 tons, up 14 percent from the previous week. New crop sales registered at 517,300 tons.

Daily CME spot market prices:

Block cheese: $1.7175 (unchanged)

Barrel cheese $1.695 (unchanged)

Butter: $1.67 (up 1 cent)  

Grade A NFDM: $1.3675 (unchanged)

These data and comments are provided for information purposes only and are not intended to be used for specific trading strategies. Commodity trading is risky and FCStone Group, Inc., INTL FCStone Inc., and their affiliates assume no liability for the use of any information contained herein. Although all information is believed to be reliable, we cannot guarantee its accuracy and completeness. Past financial results are not necessarily indicative of future performance. Any examples given are strictly hypothetical and no representation is being made that any person will or is likely to achieve profits or losses similar to those examples. References to and discussions of exchange traded products are made solely on behalf of FCStone, LLC. References to and discussions of OTC products are made solely on behalf of INTL Hanley, LLC, and OTC products are only available to eligible counterparties.

 



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