Blocks edge over $1.60, futures rally eases

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Editor’s note: This market commentary is provided by the Dairy Division at FCStone/Downes-O'Neill in Chicago, Ill.

Regardless of the soap opera-like drama that has become the spot market over the past week, we understand there is more fresh product freeing up in the country this week.

For now, the best way we can characterize the spot market is “in balance” when in the mid $1.50 range ― not over $1.60. Block cheese closed at $1.6025 on Wednesday.

Although pontificating what the spot market might do in a week or two is akin to predicting the weather, we expect that the market should chop around the mid to high $1.50 average for the balance of the week. As such, we expect a choppy to lower trade on Class III and cheese futures as those prices attempt to converge some with spot.

Meanwhile, the U.S. dollar got crushed ― now almost a full $1 off recent highs. Energy, equities all rallied big time. Add to that a dry weather week, and still a lot of on-farm corn storage reluctant to go to elevators, keeping cash solidly priced, and we bounced in what still appears to be a larger bear market. 

Grain prices will remain highly volatile in the next few weeks ahead of any earlier than normal pollination. Traders are trying to measure the impact of a general lack of rain and whether or not it will result in the USDA adjusting corn yields lower than the record 166- bushel-per-acre corn yield and 43.9 bu/acre soybean yield.

We look for corn to open firm and for beans to open 3 to 5 higher.

Daily CME spot market prices:

Block cheese: $1.6025 (up 2.25 cents)

Barrel cheese $1.5225 (unchanged)

Butter: $1.405 (down 0.5 cent)  

Grade A NFDM: $1.19 (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.

 






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