Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
The downward slide continued in dairy, as both Class III and cheese slipped lower yet again.
Volume was moderate at just over 1,350 contracts traded as the market finished the day with May up 7, while remaining 2013 contracts were -1 to -15 cents. The question being asked most frequently in the last two days is whether this move is a change in trend or just a simple correction. Although we believe this move to be a correction, several bearish factors have weighed on the market as of late, the first being weather.
Wet weather in New Zealand, as of late, has helped pasture conditions with some expecting conditions to be on par with where they were last year, by the end of the quarter. Reports of improving weather in the EU could help their milk production recover in the coming weeks. Domestically, recent moisture in the Midwest has helped improve drought conditions as well although not significantly in many areas.
On the other hand, elevated international prices, along with a healthy export market, have continued to support domestic dairy markets even with reports of healthy inventories going into the flush. With all of this being said, the recent run higher may have been one which could be described as “too much, too fast.”
Domestic weather for both grain prices as well as milk production is likely the biggest x-factor moving forward, and it is yet too early to tell whether conditions will be favorable or not contributing to some of the skittishness seen in the last two weeks. One thing seems certain that producers domestically will try to produce as much milk as they can in the coming months with strong margins being seen on the board. This sentiment has been confirmed by feed companies stating their producers are looking to put additive products back into their rations over the past few weeks to ‘gear up’ production.
Spot session results:
Block cheese: $1.865 (unchanged)
Barrel cheese $1.725 (down 3.25 cents)
Grade A NFDM: $1.76 (down 2.5 cents)
Butter: $1.69 (down 4.5 cents)
May Corn was up slightly on the day to settle 1 cent higher at 6.39 ½, while May beans were lower, down 15 ¾ cents to 1404. Weekly ethanol data showed production up slightly to 853,000 barrels per day vs. 832k a week ago, while stocks held mostly steady up just 4 million gallons. Bird flu concerns continue to be an issue and kept pressure on the soybean market throughout the session, while a mixed weather forecast leaves corn searching for a short-term direction. Stats Canada released acreage estimates this morning with all wheat plantings expected to be up 12.3%, corn up 7.6%, and beans up 3.4%, while canola acreage suffers down 11.1% ― something for producers to keep an eye on as basis on canola meal may not be as good as it was with the record acreage planted a year ago. Though with the snow and cold, many farmers are likely still undecided at this point and domestically that holds true as well.
We look for corn to open 1 to 5 cents higher and beans to open 8 to 13 higher.
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