Editor’s note: This market commentary is provided by the Dairy Division at FCStone/Downes-O'Neill in Chicago, Ill.
Class III futures were lower on Sunday night and losses of 10 to 20 cents held right up until the spot session yesterday. When the barrels gained a penny and blocks closed unchanged with a bid, futures prices rebounded, led by April. On the day, March and April each closed 2 higher, but May through September couldn’t manage to climb out of the hole ahead of the USDA’s milk production report. May through July closed down 18 to 20 cents, and remaining 2012 months were steady to 5 lower. By the time the milk production report came out, prices were down as much as 30 cents post settlement electronic trading.
Despite the milk production numbers, Class III has shown little in the way of reaction overnight. The spread April-May movement from yesterday reinforces the bearish outlook, as May moved sharply below April. Still, we are somewhat surprised by the lack of follow-through selling after the report came out — and overnight — but it will be difficult for futures to show substantial declines until the spot cheese market can break. Given what we hear, cheese is tighter than you’d expect with such milk production figures and that may put futures in limbo for the time-being — caught between bearish milk production and a firming fresh cheese market.
Grains were lower from the outset, led to the downside by wheat as Russian exports have picked up of late; Russia’s first deputy prime minister stated on the government web site that they will not impose any grain export restrictions in 2011-12 (through June 30), with exports seen reaching up to 27 million tons this season. On the day, wheat closed down 19.75 cents to 652.25, corn dropped 9.5 cents to 663.50, meal was down 3.50 to 370.90, and soybeans finished the day down 7.50 cents at 1366.50. Early planting has now started in parts of Missouri, Illinois and Iowa on corn, with the weather forecast pointing to an unseasonably warm April. Technically, the market looks as though a sizeable break could be on the horizon ahead of the stocks and planting projections at the end of the month, and overnight prices are confirming the downside move with corn down 6 cents, soybeans down 10 and wheat off 7.
We look for corn to open 7 to 10 cents lower and for beans to open 9 to 12 lower.
Daily CME spot market prices:
Block cheese $1.5825 (unchanged)
Barrel cheese $1.5925 (up 1 cent)
Butter: $1.5225 (up 0.75 cent)
Grade A NFDM: $1.2675 (unchanged)
These data and comments are provided for information purposes only and are not intended to be used for specific trading strategies. Commodity trading is risky and FCStone Group, Inc., International Assets Holding Corporation, and their affiliates assume no liability for the use of any information contained herein. Although all information is believed to be reliable, we cannot guarantee its accuracy and completeness. Past financial results are not necessarily indicative of future performance. Any examples given are strictly hypothetical and no representation is being made that any person will or is likely to achieve profits or losses similar to those examples. References to and discussions of exchange traded products are made solely on behalf of FCStone, LLC. References to and discussions of OTC products are made solely on behalf of INTL Hanley, LLC, and OTC products are only available to eligible counterparties.