Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
With ADPI in full swing, dairy markets were a bit quiet yesterday with just under 1,000 contracts trading yesterday. Price movement was active despite the lower volume; however, Class III milk settled anywhere from -.08 to +.32 on the day. The spot market was mixed, as well, with blocks up ¾ and barrels down 2 cents on strong activity of 5 trades for the block and 6 for the barrel. The barrel closed off its low of $1.6625, supporting the view that it may be near if not at a bottom.
Fundamentally, little has changed as of late. On one hand, we have plenty of milk and supplies are adequate. On the other hand, a strong export market along with higher international prices, has helped support domestic markets in light of this bearish news.
That being said, we should expect some choppiness going forward as traders reassess the current fundamental picture. Some warm weather in California recently is of particular interest, especially as we come into the flush. Should this warm weather continue for any lengthy period, we could see some production problems come to fruition. However, as of now, it doesn’t look as if this weather is sticking around with highs back into the low 80s next week. With GDT coming Wednesday, we may have a clearer picture from an international perspective, although significant gains in pricing are not expected.
Spot session results:
Block cheese: $1.8675 (up 0.75 cent)
Barrel cheese $1.665 (down 2 cents)
Grade A NFDM: $1.76 (unchanged)
Grain prices skyrocketed yesterday, led by corn which saw the May contract up the limit, 40 cents to 6.84, while December trailed slightly gaining 35.5 cents to 559.5. Beans lagged for most of the day, but caught up with corn reaching limit higher. May beans finished up 41 cents to 1471.75, while new crop was up just 19 to 1229.25.
Weather forecasts that had suggested improving weather gave way to cold/wet forecasts over the weekend, interfering yet again with field work for a bulk of the U.S. Corn Belt. Planting delays for now mean less corn and more soybean acres, which is what caused that market to lag. Options expiration occurred Friday which is often times followed by a sizeable futures move, and that may have contributed to the size of the move, as well. The cold weather brought some freezing to the Southwest and continues to wreak havoc on an already-poor wheat crop. July wheat gained 24 cents to 692.5 on the day. After the close, weekly USDA reports confirmed the market’s concern with wheat condition ratings falling to 33% down by 2% from last week with crop tours to take place this week and corn planting at a record slow pace -- just 5% completed vs. 31% on average. Weather can make markets do the unpredictable, and yesterday may not be the last of the gains we see.