Class III futures settled yesterday on light volume as lack of fresh news convinces traders to move prices in one direction or the other. CME spot cheese did manage to gain a ½ penny in both blocks and barrels but futures traders did not show much enthusiasm. Overnight trading is light and mixed and unless we get a big surprise from the CME spot market over the next couple of days, we expect a quiet but firm trade to close out the week.
Another potential reason for the light volume yesterday is that the Idaho Milk Processors Annual Conference begins today in Sun Valley and many of the top industry players from around the country attend this important meeting. Dave has been in
CME spot butter prices continued their impressive gains yesterday easily surpassing $1.90 to settle at $1.9175. We have commented enough about the tightness of butterfat and cream in the country, but cream multiples remain extremely high and yesterday’s weekly USDA commentary suggest that ‘manufacturers and handlers are questioning how much above $2.00/lb the price will go’. We rarely comment on the USDA’s weekly butter stocks report but for the week ending Aug 9, 9.07 million pounds were in USDA selected warehouses. This is the lowest August storage figure since 1998. August 1998’s monthly CME butter price average was $2.1730. September 1998’s average price was $2.7566. We don’t believe that butter demand is strong enough to get prices up to September 1998 levels, but we do believe that $2.00 is a very realistic target given the current supply/demand situation.
After the CME launched International Skimmed Milk Powder (ISM) futures contract on May 24, 2010, not a single trade has occurred - until yesterday. One September ISM futures contact traded at $2,780/MT ($1.2610/lb) at 2:30AM during yesterday’s overnight session. ISM is the first exchange-listed dairy contract with physical delivery points located around the world. We will start to keep an eye on this contract for more activity.
USDA released the World Ag Supply/Demand Estimates this morning and appears slightly bearish on the surface for
8/11 Class III Futures: Volume: 692 Open Interest (OI) Change: +48 Total OI: 25,438
8/11 Class III Options: Est. Put Volume: 502 Total OI: 19,520 Est. Call Volume: 99 Total OI: 17,456
8/11 Spot Markets: Block Cheese $1.62 (UP 1/2), Barrel Cheese $1.5850 (UP 1/2), Butter $1.9175 (UP 2), NFDM: A $1.21 (UNCH), X $1.2250 (UNCH)
8/11 Other Dairy Futures Volume: Butter: 153 Dry Whey: 3 NFDM: 26 Class IV: 9 Cheese: 4 International SMP: 1
8/11 Individual Class III Futures Prices, Change, Volume & Open Interest
Aug $15.07 UP 1 Vol: 114 OI Change: DOWN 15
Sep $15.55 UP 4 Vol: 234 OI Change: DOWN 41
Oct $15.16 UP 3 Vol: 140 OI Change: UP 30
Nov $14.87 UP 3 Vol: 20 OI Change: DOWN 3
Dec $14.72 UNCH Vol: 18 OI Change: DOWN 1
Aug-Dec 2010 Avg: $15.07 UP 0.02/cwt
Jan-Dec 2011 Avg: $14.60 DOWN 0.01/cwt
These data and comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy and completeness. Commodity trading involves risks, and you should fully understand those risks before trading.