Quiet day at the CME for dairy markets

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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 Class III market fell nearly silent yesterday as the ADPI conference got under way in Chicago, drawing many from our industry from behind their desks and the markets in general. 

The Class III futures only managed a paltry 521 trades, less than half the volume posted last Friday. The market finished mixed on the day, with gains posted through the August contract, while the later portion of 2012 and early 2013 contracts finished in the red. The third quarter pack escaped the day unchanged, but has fallen15 cents since last Monday and $1.37 for the month of April, as hedgers contend with the continuing ample production seen around the world. 

The April NASS all-milk price was released reflecting the impact of higher-than-normal milk production, posting a grim $16.90 for the month, down 30 cents from March and $2.70 from April of last year. We expect the selling trend to continue into the early summer months before any sort of substantial rebound materializes. 

Many producers find themselves in a predicament as stable to rising grain prices cut into profit margins in the face of the weakness of the dairy markets.

The spot cheese markets’ trading activity slowed on a quiet day, as just four trades posted in the barrels while the blocks were blanked. The barrel trades were accompanied by a single bid and offer, yet no interest on either side materialized for the blocks. The spread between the two widened slightly with the ¾ cent loss in the blocks, leading one to believe the weakness expressed in the barrels with soon spread to the block market in the hopes of lessening the gap between the two.

The grain complex ended the day on a buying spree, as all of the markets posted gains on the day. The grain markets have been dragged higher by the strength in the soybeans, as was the case again today. The South American crop is expected by some to be as much as 12 percent less than the production level of last year. The drop in production has many traders believing that China’s demand will shift to the U.S. to fill their needs.

But the big news is the Crop Progress Report was released yesterday, showing corn plantings to be 53 percent complete, a gain of 25 percent from last week and 26 percent higher than this time last year!! We’ve got a record pace of corn plantings and, so long as the weather cooperates, we are looking at a bumper crop of great proportion. But we have some time and some weather to get through first.

We look for corn to open 4 to 8 cents lower and soybeans to open 5 to 15 lower.

Daily CME spot market prices:

Block cheese: $1.53 (unchanged)

Barrel cheese $1.4275 (down 0.75 cent)

Butter: $1.355 (down 0.5 cent)  

Grade A NFDM: $1.1475 (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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