Editor’s note: This market commentary is provided by the Dairy Division at FCStone/Downes-O'Neill in Chicago, Ill.
The focus shifted in Class III over the past few days. The talk has gone from milk surpluses to marginal increases in demand for both block and barrel and warm weather. On one hand, you have commercial buyers pulling forward processed cheese purchases for the summertime-grilling season and, on the other, you have what is anecdotal chatter about marginal surge in export demand, all alongside promotional season. Meanwhile, a late winter heat wave is making it possible for people in the Midwest to grill like its Memorial Day Weekend instead of St. Patrick’s Day. The result: Continued firming Class III milk futures and finally with good volume and respectable OI increases.
The spot market posted big gains Thursday, albeit without a single trade taking place. The blocks jumped 7.50 cents to settle at $1.5825 on one bid. The barrels went up three cents to settle at the identical price of $1.5825, driven by a sole, uncovered bid. Historically, the spread between these markets ranges between three and five cents and it appears the blocks are being bid toward an effort to keep the spread from getting out of line too far as barrels are the driver in this mini bull run of late.
U.S. grain futures were consistently strong in yesterday’s trade with all prices gaining, and corn playing catch up to the strong bean prices. Near-term supply seems to have tightened, and with corn moving above the 200-day moving average spurring technical buying. Many point to the continued acreage battle with some last minute changes from corn to beans by farmers. Drought concerns in the US are starting to add to the weather related fears as well.
May corn finished up 10 ¼ cents to $6.69 a bushel. May corn from Monday’s open is up 25 cents, which still trails the gains in the beans. Beans also dragged wheat futures up, and combined with some weather concerns general crop weakness pushed wheat up 21 cents to $6.64 ¾. Beans come in with the strong export demand and continue to pull the other grains with it. Thursday, May beans finished at $13.69 a bushel, up 18 3.4 cents. As usual, China is rumored to be a big buyer, contributing to the strength.
We look for corn to open 2 to 3 cents lower and for beans to open 3 to 4 lower.
Daily CME spot market prices:
Block cheese $1.5825 (up 7.5 cents)
Barrel cheese $1.5825 (up 3 cents)
Butter: $1.515 (up 0.75 cent)