Dairy markets: Hit by a one-two combo

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Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.

  Class III 2014 contracts settled anywhere from -13¢ to -45¢ yesterday, in spite of a move higher in spot cheese prices. While 2014 bore the brunt of the move lower, some 2015 contracts saw double-digit declines as well. Currently, the Class III 2015 pack is trading near $18.05/cwt.

The major movers were a simple-but-vicious one-two combo:

1)  Dairy Product Report revisions

2) Continued plunge of GDT prices

GDT results reflected further weakness internationally (8.4% overall). This was the 11th out of the last 12 auctions that prices have moved lower.

While the domestic market has ignored international weakness, pointing towards tight supply, weather concerns and milk being diverted as a result of the new school year, it is only a matter of time before we see some price erosion. 

A weaker spot market and GDT auction contributed to declines in NFDM, Class IV and butter futures.   Concerns over tight supplies continue to support the butter market – which saw more subdued declines – while buyers of NFDM sit on the sidelines looking for further declines in that market.

 

August 5 spot session results:

Block cheese: $2.0700 (up 1.0¢)

Barrel cheese: $2.1025 (up 1.25¢)

Grade A NFDM: $1.5900 (down 5.0¢)

Butter: $2.4000 (unchanged)

 

Today's expectations:

• Class III, Cheese & Dry Whey to open firm

• Class IV to open soft

• Butter to open steady

• NFDM to open slightly higher

 

Grain futures

Weather forecasts continue to push grain values lower, with the nearby September corn contracts losing 2.5¢ and beans declining some 13.75¢.  Most forecasts call for much-needed rain over the next 2-3 days. Monday night data showed the corn crop was 73% good, down slightly from last week, but up significantly from a year ago at 64%.  This crop is now the best-rated crop seen in the last 10 years.

The soybean crop showed the national crop at 71% good, unchanged from a weak ago and up year-over-year from 64%.  FCStone estimates the soy yield potential at 46 bushels/acre, while outside estimates also are forecasting a robust yield.  Should these come into fruition, we could find stocks building significantly.   
 

Today’s expectation:

• Grain complex to open slightly firm

 

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