Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
After all the excitement of last week, things have quieted down a bit on the spot and Class III markets.
Class III contracts started out yesterday on a negative note, but managed to get back into mostly positive territory by the end of the session. Prices were mixed from August 2013 out to Nov. 2014, with contracts settling as much as +7 cents to –4 cents on the day and volume was decent at 1,244 contracts trading hands. There were no big standout months in the market, and the majority of the volume was kept to Aug. Sept. and Oct. 2013 contracts. Class III may have been taking a cue from the spot market as we saw no activity in either the blocks or the barrels at mid-day, leaving prices unchanged on the session.
Fundamentally, the picture still stands for the complex: no news of milk shortages, weather has been perfect in most areas for cows to continue to produce, feed prices look to be falling, and we seem to have plenty of cheese on hand. CWT announced assistance in helping export 4.2 million pounds of cheese and butter yesterday to Europe, Africa, and the Middle East.
Technically, we still see support for Class III, cheese, and whey. However, without lack of direction from some news or event in coming days, we may continue to stay sideways within the ranges that were set last week. The caveat to that is that it should have a slightly bearish slant, given the fundamental picture and likelihood of a retest of previous support levels.
Spot session results:
Block cheese: $1.77 (unchanged)
Barrel cheese: $1.765 (unchanged)
Grade A NFDM: $1.795 (up 0.25 cent)
Butter: $1.3975 (unchanged)
A bit of a surprise for the grain complex yesterday as we saw higher prices in the overnight and early morning market hours, only to have them turn around and test Monday’s lows towards the end of the session.
Dec. 13 corn settled out at $4.4725 down -16.75 cents on the day, setting a new low settlement price and closing below the $4.50 mark for the first time.
With very little in the way of major support until the $4.00 mark, we could see some capitulation to the downside in short order. To play a little devils’ advocate, however, the daily and weekly charts for Dec. corn are oversold. Pay attention if we cannot break the $4.35 level without strength, as this may signal a turn to the upside for a retracement move on the contract. That level is not huge support, but it is the next stop on this train.
Soybeans managed to stay positive on the day, even though they did give back most of their earlier gains. Nov 13 beans settled back at $12.2775 up +2.50 cents on the day after they tested a key resistance level at $12.40 and failed. Next support levels come in at $12.22 and then again at $12.05. The interesting part of yesterday’s action in the beans was that we did not see any of the funds add or take away any of their net overall position ― a point that one should keep track of as we move forward over the next couple of weeks. We may be just one good Midwest rain system from seeing soybeans fall sharply and stop lending support to the corn and wheat markets.
This morning, we look for a mixed open with corn steady to 3 cents higher and beans down 6 to 12.
The trading of derivatives such as futures, options, and swaps may not be suitable for all investors. Derivatives trading involves substantial risk of loss, and you should fully understand those risks prior to trading. Any reference to past performance is not indicative of future results. All references to futures/options trading are made solely on behalf of FCStone, LLC. All references to swap execution and bi-lateral swaps are made solely on behalf of INTL Hanley, LLC. FCStone, LLC will clear swaps when applicable. Swaps are only available to eligible counterparties. All observations of economic, political and/or market conditions are not intended to refer to any particular trading strategy, promotional element or quality of service provided by INTL FCStone Inc. and its subsidiaries and should be construed as market commentary. All recommendations to buy or sell a specific derivative or forecasting statements regarding market activity and the pricing thereof should be construed as a solicitation in any jurisdiction in where such an offer or solicitation would be legal. Proper context and guidance including but not limited to the particular trading objectives, financial situations and the needs of the intended audience were taken into consideration when this recommendation was prepared. Contact your account representative for specific advice to meet your specific trading preferences or goals. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by INTL FCStone Inc. and its subsidiaries. Sources of information believed to reliable were used in preparing such observations, and no guarantee or representation regarding the accuracy of those sources has been made. INTL FCStone Inc. and its subsidiaries are not responsible for any redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material.