Editor’s note: This market commentary is provided by the Dairy Division at FCStone/Downes-O'Neill in Chicago, Ill.
The Class III futures opened the week mixed on light volume. Futures were mostly lower headed into the Monday morning pit open, but recovered as buy side interest in the spot market was enough to keep the market supported. The spot market closed unchanged on both blocks and barrels, but futures continue to take that with an upside bias despite the large number of loads being brought to the exchange. Settlements were 2 lower in Sept and 4 lower in Oct, but 6 to 12 higher from Nov through March 13, as fear of falling milk production is keeping a strong grip on trade psychology.
We must say that while in the past talk of closing down dairies seemed to greatly outweigh any actual impact, today that certainly seems to be flipped. This is further supported by the slaughter rates noted in yesterday’s report.
At the exchange futures volume was less than 750 trades on the day, though call option volume was strong with a number of 20.50 to 22.00 calls being traded in Q4. We’d expect the market to continue to cool off, as more and more out-of-office replies pop up heading into the last holiday of the summer.
The grain markets opened the Sunday night session to sizable gains on the heels of the ProFarmers tour estimates Friday after the close, but as has become a pattern of late a bullish report was met with short-term buying and eventually a lower close. Informa put out crop estimates over the weekend with corn production at 11.025 billion ― well above ProFarmer ― and soy production at 2.838, up nearly 250 million bushels from the ProFarmer estimate. Reality is likely still somewhere in between, though we are very fearful of another soy rally to potentially drive the corn market higher. It seems likely now, however, that the market will hang around the $8.00 level into the September report, as poor yield results are being offset by softening basis with new crop supplies coming available for the time being.
We look for corn to open steady to three cents lower and for beans to open 2 to 6 lower.
Daily CME spot market prices:
Block cheese: $1.8525 (unchanged)
Barrel cheese $1.8025 (unchanged)
Butter: $1.8025 (up 0.25 cent)
Grade A NFDM: $1.665 (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.