Class III, cheese consolidate recent gains

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

Milk and cheese futures started up Sunday night and faded gently into Monday morning’s session. Losses were exasperated when spot cheese failed to continue its price increases from last Friday. Bulls need to be fed ― and Monday’s action did not feed any bulls. So we look at the most recent trading as a slight consolidation after a corrective move started Friday. 

Coinciding with this recent bounce in futures prices is that we do hear some anecdotal reports of mild tightening of Midwest milk and perhaps even some slight increases in demand for fresh product. While the supply/demand fundamentals on cheese are perhaps a little more taut today than three weeks ago, we don’t expect that it will keep us propped up throughout the week. In fact, we expect Class III and cheese to be relatively choppy for some time to come, edging to the upside in the near term and eventually returning to test the trading lows established the first week of May. While the market can certainly make new lows, the probability of that happening seems more and more limited by the day.

One area of concern from some we speak with has been the strength of the U.S. dollar and its impact upon dairy export demand. Although we are simply retesting a St. Patrick’s day top, concerns in Europe are mounting. The inability of Greece to form a unity government following recent elections may bring about new elections, with anti-austerity parties gaining popularity and an increasing possibility that Greece will dump the Euro. For now, U.S .dairy prices and a strengthening dollar ought to dampen short-term export purchases. But we do not expect that to be the case for long. The value of the U.S. dollar, while important because we price commodities in “dollars”, is not the be-all and end-all for U.S. dairy exports or prices.

In the grain complex, new crop corn found its water mark nearing an even $5.00/bu. Beans plunged early and rebounded and plunged again only to find buying late in the day as funds are active in an extreme liquidation scenario; corn never really had too much pressure and we anticipate a short-term pop here with July potentially testing the $6 mark again. But we see longer term weakness still to come. Even the USDA Crop Progress reports out late couldn’t force early overnight pressure upon the grain markets. Corn was reported at 87 percent planted vs. 71 percent last week. Beans came in 46 percent planted vs. 24 percent last week. We have an ideal planting scenario.

We look for corn to open 4 to 6 cents higher and for beans to open 15 to 20 higher.

Daily CME spot market prices:

Block cheese: $1.50 (unchanged)

Barrel cheese $1.45 (unchanged)

Butter: $1.34 (up 2 cents)  

Grade A NFDM: $1.1225 (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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