Nearby Class III market hammered lower Friday

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

Class III futures moved beyond recent support and fell hard on Friday, based primarily on a resurgence of cheese offers in Chicago. Trading volume got a boost and Open Interest increased, but not enough to make a substantial argument (less than 10 percent of volume leader April were “new positions” Friday). Blocks posted 13 trades, down .75 to $1.48.  Barrels registered 8 trades on a drop of two cents to $1.48 as well. NASS pricing results showed a drop of over a penny for both markets. Blocks NASS price was down 1.06 cents to $1.49. Barrel NASS price dropped 1.09 cents to $1.5143. While the nearby contract looks poised for more downside, we look for the futures market to build more on the cost-of-carry structure and return to a more sideways choppy trade for most months after Friday’s heavy drop.

The outlook for the cheese market was left murky with no true indication provided by the Dairy Product Report Friday. January American Cheese production rose 3.1 percent year over year to 370.6 million pounds. Total cheese production was up to 912.33 million pounds, up 2.9 percent year over year, but dropped 1.96 percent month over month. Of special note was the cheese production report out of Australia. Total cheese production for Australia year over year jumped 17.6 percent, pointing to the challenges cheese prices will face on an international basis.

U.S. corn futures were mixed throughout last week, finishing stronger with some of the support coming from soybean and wheat prices. There is a lack of significant news at this point in the cycle, and that has left prices in somewhat of a range bound trade. Corn attempted to break out of its recent trading range. But once it did so, it quickly returned back to the range and seems to lack the ammunition to follow through on the breakout to this point. Perhaps the USDA report coming this Friday morning will provide that?  The acreage conversation is still in play, but at this point looks to have corn out front with other products taking a back seat when planting season comes around. May corn traded at $6.55, CBOT May wheat at $6.745, and May beans at $13.33. The September corn contract was the biggest gainer with an increase of 6.5 cents to $6.04 ½.

Look for corn to open 4 to 6 cents higher and beans to open 1 to 3 lower.

Daily CME spot market prices:

Block cheese $1.48 (down 0.75 cent)

Barrel cheese $1.48 (down 2 cents)

Butter:  $1.45 (down 1.5 cents)  

Grade A NFDM: $1.2875 (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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