Dairy markets: Spot strong, but futures weaker

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

There was volatility galore, but despite big ups and downs the April Class III contract gained only 19¢ last week, and 9¢ of that came last Thursday (the close of the holiday-shortened week). Conversely, September Class III lost 20¢, and this is generally more indicative of the week went for the majority of Class III and cheese futures contracts.

It must serve as a letdown to bulls on the heels of a spot cheese market that rose significantly last Thursday. The spot cheese rose vs. a week ago, and we might be heading back to year-ago price levels. The cheese coming to the CME spot market for sale is reportedly very young/fresh, that often is bullish because it means there isn’t older cheese backed up and getting pushed out. But remember, nothing sold on the spot market for weeks, and now that it is it is reportedly young, and expectations are that it will back up and more cheese will come. Reports suggest that the U.S. has lost much of its price competitiveness to Australia and Europe and is losing international deals.

NFDM has dropped and is continuing to drop, leading the turn toward bear markets. California has all the milk it wants and then some; powder plants have been and are running strong. Butter is holding simply because it has the lowest inventory levels, globally, of any dairy product, but that, too, appears to have no significant upside potential in the short/medium term. Class IV has more room to fall, and then Class III will follow in hot pursuit.

 

April 17 spot session results:

Block cheese: $2.2800 (up 5.75¢)

Barrel cheese: $2.2575 (up 7.0¢)

Grade A NFDM: $1.8650 (down 2.5¢)

Butter: $1.89 (unchanged)

 

Today's expectations:

• Class III, Cheese & Dry Whey to open firm

• Class IV & NFDM to open lower

• Butter to open steady

 

Grain futures

The July corn contract was unchanged on the week and remains above key technical support. Today's USDA report is expected to show planting progress is behind, but the 6- to 10-day weather forecasts looks friendly to planting.

 

Today’s expectation:

• Grain complex to open soft

 

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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