Editor’s note: This market commentary is provided by the Dairy Division at FCStone/Downes-O'Neill in Chicago, Ill.
It appears as though West Coast cheese came to the market and commercial buy interest was rampant from all over the place to absorb it rather well. It seems that the first wave of buy orders from quick-service restaurants and pizza chains have been filled.
Buy interest should continue to slow a bit as current spot pricing fails to provide value relative to the weekly averages. So, do the sellers have much left to unload? Floor rumor suggests that the cheese being sold is near the 30-day limit, and this tells us there is still a backup of product to come. We tilt the short-term hand to the spot sell or down side. The market may be simply consolidating right now before another move higher, but we’re not there yet.
California dairyman will be feeling the pain a lot sooner than the rest of the country as the 4b price came in at a $2.64 discount ($16.76) to the NASS Class III price ($19.40). Call us if you have questions on this difference and we can discuss.
Cheese futures traded 18 times and were steady to slightly lower. Activity is sporadic in this new contract, but since its existence lulls have been followed by big volumes, so watch out.
In grains, we are really not sure what to say at this point. The grain markets are clearly bullish as they have been for many, many months now. If you have not bought yet, we cannot recommend buying now. A dip should come, a correction of sorts. That is when buys should be timed for now. Buy calls on a slight break to protect form the scary but real chances of $8 to even $9 corn but don’t go buy crazy at these levels without puts beneath.
We look for corn (old crop) to open 9 to 11 cents higher; (new crop) to open 4 to 6 cents higher and beans to open 4 to 7 cents higher.
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.