Stable spot prices tug on 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.

Class III finished mostly higher Tuesday on a quiet, but stable, spot cheese market and perhaps a slight recognition of firmer outside markets.  The reality is that we’re beginning the five-week pricing period for July milk, and though the spot cheese price is at historically demand debilitating levels, traders find it difficult to sell into a steeply discounted market.  On the other hand, the buy side seems exhausted and we suspect it will take more time at these spot prices — or another jolt of buy interest on the spot market — to spur a futures price rally.  So, prices consolidate at these levels and we wait for more news.

We have mentioned before that you need to feed a bull market and, over the past few days, rations of “bull news” seem to be running low. There are anecdotal stories of better-than-expected demand at these levels, but we also hear of some slight discounted cheese moving about.  That sort of “mixed bag” information hasn’t been conducive to creating a wall of worry that would propel us higher.

Producers ought to be forming their risk-management game-plan for the balance of the year if they have not already done so. 

With the USDA releasing its Cold Storage Report for the month of May and an extra-large bucket of grain news coming out over the next few weeks, there is plenty of reason for major volatility in commodity markets. 

We look for Class III to open soft, for spot to be steady to slightly and for futures to close mixed

Corn prices bounced yesterday, following six days of declines yesterday, despite improving ratings (70% good/excellent) and good weather, propelled by rumors of strengthening export demand and a bounce to the U.S. dollar which dropped over 500 points as the Euro strengthened on optimism over the situation in Greece. The July contract gained 7 cents to settle at 707.50, while new crop gained a solid 19.75 cents to settle at 680.25. Beans followed corn higher with July, settling 13 cents higher to 1348.75, while November gained 14.25 to close at 1349.75.

According to customs data, China imported more than double the amount of corn in May than it did last year, but that was still only 12,000 tons. Total January-May corn imports rose to 24,442 tons, up just 3% from last year’s pace. Japan took a large purchase order, and rumors were rampant about a big Chinese corn purchase that most we trust found hard to believe. We’ll chalk it up to a dead-cat bounce assisted by outside markets in similar fashion.

We look for corn to open 2 to 5 cents lower; soybeans to open 5 to 7 lower.

Daily CME spot market prices:

Block cheese: $2.13 (unchanged)

Barrel cheese: $2.0675 (unchanged)

Butter: $2.14 (unchanged)  

Grade A NFDM: $1.64 (down 1 cent)        

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., International Assets Holding Corporation, 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.

Source:  FCStone/Downes-O'Neill


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