Dairy markets: Shoring up positions early?

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

Weakness in the Class III market was the theme for yesterday’s trade. The 3Q 2014 pack lost an average of 26¢ to settle at $19.86/cwt., and the 4Q 2014 pack settled at $19.09/cwt., down 7¢. Trading and open interest have been increasing in 2015 contracts over the past couple of weeks. It feels as though more are getting a head start to shore up their positions much earlier than normal, and seems more reactionary as to how the trade played out in the first part of 2014.

The spot cheese session sent a mixed signal to the market, with blocks being bid steady and barrels offered steady. As Class III worked its way down, we saw more of a downward slide on cheese prices. Weekly stocks for cheese came in down 0.9% from last week and still down 26.4% year over year. While those numbers would indicate more of a bullish tone, we are into the typical grilling season and demand has yet to increase significantly due to weather. This may be just one part of the conundrum in the current market, and it may take some time yet for things to sort themselves out.

Whey futures were generally lower yesterday, with some trading seen out into the first half of 2015. Again, it appears as those who are in need of protection are layering in some now, rather than waiting until later.

The Class IV market saw a mixed trade. The largest gains were seen in the 1Q 2015. Mixed signals from Butter and NFDM markets left traders a bit confused on near-term direction, with butter futures down and NFDM futures up during yesterday’s trade.

 

May 15 spot session results:

Block cheese: $1.9975 (unchanged)

Barrel cheese: $1.9600 (unchanged)

Grade A NFDM: $1.7825 (up 0.25¢)

Butter: $2.1600 (unchanged)

 

Today's expectations:

• Class III & Cheese to open lower

• Dry Whey to open mixed

• Class IV & Butter to open lower

• NFDM to open steady 

 

Grain futures

Corn markets moved lower yesterday. The trade generally expects to be 75% planted by Monday, above the 71% 5-year average, but there is still some worry about late plantings in the far northern sections of the Corn Belt. This could lead to a little recovery in the move down as we go into next week.

Soybean export numbers came in strong. We’re still showing an incredibly tight old-crop situation, but the market still ended up down on the day. Other factors at work were lower prices in corn and wheat, fund liquidation, and talk of a possible increase in South American numbers.

 

Today’s expectation:

• Grain complex to open mixed

FC Stone's annual Dairy Outlook Conference will be held June 18-19, in Chicago. Visit www.intlfcstone.com/events for information.

 

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