Firming dry whey underpins quiet Class III market

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

The block/barrel spread widened ever so slightly Thursday, but made no major moves, and milk futures shirked a discount to cash markets but closed mostly off their highs amidst still subpar volume on another up day. 

While there is little reason for a push higher on futures today, we expect that any weakness on Class III or cheese will be bought. Slaughter under federal inspection was down 0.2%, at 52,700 head, compared with the same period the previous year. This is the first drop versus 2011 since the week ending March 3. Year-to-date slaughter levels are 1.6 percent higher than 2011 levels, with 1,034,800 head slaughtered. Milk is cheap and available out in the country, and now we hear that another major co-op is going to be paying 60 cents under Class III in many Midwest states for an estimated three months. It’s a trend and we follow those.

In the grain complex, the USDA offered up something for everyone in their Crop Production Report released yesterday morning. Of course, “something for everyone” depended on which market of the grain complex you were watching. The report was bearish for corn and bullish for beans.  July corn fell nearly 20 cents breaking the prior year-long low of $5.91 on the news.  Beans rallied 20 to 25 cents. Look for a continuation of this trend for corn. Beans ought to catch up once they’re 70 percent planted.

A closer look at the numbers if you missed them…..

Corn figures were larger than expected in every supply category. Old crop corn stocks were increased by 50 million bushels to 851 million bushels, 90 million bushels larger than the trade expected. New crop corn production came in at a whopping 14.790 bln/bu from 95.9 million planted and 89.1 million harvested acres and a national yield of 166.0 bushels per acre. U.S. corn ending stocks for 2012-13 came in at 1.881 billion bushels, compared to the average trade estimate of 1.686 billion bushels.

Bean numbers were in line with expectations. Old crop U.S. bean stocks were reduced by 40 million bushels to 210 million bushels, compared to 215 million expected by the trade. New crop bean production came in at 3.205 billion bushels from 73.9 planted and 73.0 harvested acres and a national yield of 43.9 bushels per acre. Bean ending stocks for 2012-13 came in at 145 million bushels compared to the average trade estimate of 172 million bushels.

We look for corn to open 4 to 6 cents lower and for beans to open 12 to 15 lower.

Daily CME spot market prices:

Block cheese: $1.4925 (unchanged)

Barrel cheese $1.4475 (down 0.5 cent)

Butter: $1.3025 (up 0.25 cent)  

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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