Class III futures market looking for direction

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

The fourth quarter 2013 CME Class III milk futures average has traded between $17.07 and $17.84 since Aug. 1. The average settled down 9 cents yesterday to $17.53 per cwt. On a short-term analysis, the average continues to be flip between bullish and bearish sentiment almost weekly.

From a fundamental perspective, markets are most certainly mixed. Bulls were dealt a blow last week with higher-than-expected August milk production figures, as well as a pullback in spot cheese prices. Yet, on the other hand, even with falling prices, bears don’t quite have confidence in their own position after watching fellow short-traders get trampled over in the butter / powder markets where it’s all bull horn action.

2014 Class III futures closed +1 cent yesterday to $16.79 per cwt. Demand for 2014 Class III futures continues to grow, albeit at a snail’s pace. Many in the industry have posted expectations for milk prices to collapse during the remainder of this year due to lower feed prices and increased global milk production. But, for the time being, this seems to be getting a rain check.

Spot session results:

Block cheese: $1.7825 (down 1.25 cent)

Barrel cheese: $1.745 (down 2.25 cents)

Grade A NFDM:  $1.845 (unchanged)

Butter: $1.605 (up 0.5 cent)

The grain markets finished Monday’s trade mixed. Corn futures managed to finish 1 to 2 cents higher across the board, while soybean futures settled 5 to 7 cents lower through March 2014. December corn closed yesterday at $4.5325 per bushel and November soybeans closed at $13.0775 per bushel, yielding a spread between the two of $8.545 per bushel. Since the 12th of the month, the spread has already narrowed by 75.25 cents per bushel. 

This morning, we look for corn to open 1 to 3 cents higher and beans steady 9 to 12 higher.

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