The issue we’ve run into is the valuing of those options that provide a floor for your production. Such a dramatic rally in prices has kept would-be option sellers looking for more option premium. Whether or not you’re bullish or bearish, the risk of a substantial albeit perhaps short-term futures price decline is on everyone’s mind. If there is profit margin available, dribbling sales on a percentage of your Class III and Class IV milk production is now recommended should that bring profit back to the dairy.
Keep your eyes on the price of gold and the value of the U.S. dollar. An unusual situation developed yesterday as they both finished lower (gold sharply lower) on the day. This may be a one-off or it may be a sign of further deflationary pressure yet to come in 2011. With the yet to be resolved economic maladies that seem to be on a flying saucer tour across Europe; every other month it’s a different country. And with the news this week that Standard and Poor's rating agency downgraded Japan’s debt from AA to AA-, I continue to have a more bullish tilt on the U.S. dollar here in 2011. But yesterday’s gold-dollar trade should catch our attention.
The Federal Open Market Committee said yesterday that they see no reason to change rates or the current QE2 plan to spend the earmarked $600 billion in government purchases of long-term U.S. Treasury bonds.
The grains continued to trade in a more sideways zigzag manner Thursday. From a technical perspective a move out of the late price range appears imminent (within a week). Look for grains to open slightly firm this morning.
1/27 Class III Futures: Volume: 1,993 Open Interest (OI) Change: +647 Total OI: 38,180
1/27 Class III Options: Est. Put Volume: 751 Total OI: 30,532 Est. Call Volume: 654 Total OI: 25,614
1/27 Spot Markets: Block Cheese $1,7025 (UP 1, 0 Trades); Barrel Cheese $1.6925 (UP 4, 1 Trade)
Butter $2.1000 (UNCH, 0 Trades); NFDM: A $1.6325 (UP 4 , 0 Trades), X $1.6000 (up 4 1/2, 0 Trades)
1/27 Other Dairy Futures Volume: Butter: 118 Dry Whey: 108 NFDM: 62 Class IV: 118 Cheese: 51 International SMP: 0
1/27 Individual Class III Futures Prices, Change, Volume & Open Interest
Jan 11 $13.52 DOWN 1 Vol: 53 OI Change: DOWN 39
Feb 11 $16.48 DOWN 1 Vol: 331 OI Change: UP 42