Block cheese down 1.5 cents on CME

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

The Class III markets opened Tuesday’s session softer and that weakness only increased into the spot session which saw futures trade down 20+ cents prior to the spot open. Futures appeared to offer insight into what we’d see during the spot session as both blocks and barrels settled down on the day ― blocks by 1.5 cents and barrels by ¾ of a cent. Blocks continue to see strong buy side interest with 4 loads traded, but barrels fell with nary a bid showing up. As the session wore on, the sell side pressure only increased on Class III futures, even the deferred contracts which had been resilient to fall Monday. By the close, over 1,600 contracts had traded and futures were 13 to 36 lower from May through October.

Pressure remained on the Class IV products for the second consecutive day, and weakness there allowed for Class III futures to relax their premium to the spot market as some fear seems to be leaving the market with international prices seemingly stabilizing.

Yum Brands Inc. showing a decline in profits of 27% year over year on weaker China sales certainly doesn’t help the bulls’ case and brings into question how strong demand will be this summer given the rising global dairy prices.

Spot session results:

Block cheese: $1.865 (down 1.5 cents)

Barrel cheese $1.7575 (down 0.75 cent)

Grade A NFDM: $1.785 (unchanged)

Butter: $1.735 (down 3.5 cents)

The grain markets are in an interesting short-term predicament as basis is strengthening on old crop, while new crop prices are under pressure due to forecasts for a warm dry planting window. Despite the strength in old crop prices, futures finished the day mostly lower with May corn down 7.25 cents to 638.5, while December corn finished down 10.25 cents to 522.75, while soybeans finished mixed with May higher by 2.5 cents to 1419.75, while Nov was down 6.5 cents to 1196.25. May wheat closed down 4.75 cents to 697.5.  

This morning, we look for corn to open 1 to 3 cents higher and beans to open mixed -2 to +5.

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