Weather influencing Class III futures

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

The Class III futures reversed the course of late, falling between three and 37 cents in the 2012 contracts on 859 total trades. Of the 859 trades, 163 occurred in the 2013 contracts, which settled the day with prices between down 11 to up 5 cents. The selloff was sparked by the penny loss in the block spot price, erasing any gains established in the early morning trade. Weather conditions remain a fundamentally supportive feature, with a continued dry and hot forecast for much of the nation predicted for the next 10 to 14 days. Plenty of weather premium has been built into the market as the current temperatures curtail milk production. And, when temperatures turn cooler, expect some of this premium to be removed in the form of profit-taking and the establishment of new hedge positions.   

Grains had another strong day yesterday as weather continues to dominate the trade. Corn and beans continue to rise with little resistance and the lack of rain over the weekend sending prices up over 20 cents in 2012. July corn came in at $6.92 ½, up 20 cents, while the December corn finished at $6.55 ¾, up 21 cents. Bean futures were up between 19’4 in July and 12’2 in December, settling at $15.32 ¼ and $14.62 ½. 

Crop progress reports were down across the board showing that this poor weather is having a big impact already. The corn good/excellent rating fell 8 percentage points from last week to 48 percent.. The soybean good/excellent rating followed suit, dropping 8 percent week-over-week to 45 percent.

We look for the grain complex to open higher as the bull is continually being fed. Those clinging to demand decreases in corn to stem price surges will have to wait a while for that to show up in a report and China dryness might quell those, too.

Daily CME spot market prices:

Block cheese: $1.64 (down 1 cent)

Barrel cheese $1.675 (unchanged)

Butter: $1.5275 (unchanged)  

Grade A NFDM: $1.2275 (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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