Dairy markets: Mixed signals

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Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.

Class III futures saw another volatile day yesterday, contained to the nearby months. Since April 3, the 2H 2014 pack has lost nearly 65¢, to settle below the $19.00/cwt. level for the first time since the beginning of March.

As markets have been trending lower, end users seem to be interested in building inventories. Although this is true, traders saw a similar trend lower at the end of January into early February. We all know what happened shortly thereafter: blocks bottomed out near $2.10/lb. and the market went on to rally to new highs.  While we do not anticipate history to repeat itself to the same degree, there seems to be enough concern surrounding unknown factors ahead, keeping market participants interested as prices fall.

The potential summer demand for cheese is also supportive. Couple this with selective price increases occurring at the retail level (while at record levels) muting any effect on consumer demand. This unwillingness to raise prices has negated any significant anticipated destruction.

Unknown factors such as weather, input costs, etc. also have the market in a state of flux and with little fresh fundamental news, one could expect to see such spurts as the market reassesses.  In short, signals are mixed.

Butter futures saw declines across the board. Easter holiday sales have dried up.  NFDM prices were mixed, however. From what we are hearing buyers are obtaining product on a “hand to mouth” basis as demand internationally has slowed. 

Anhydrous milk fat posted the only gain at the GDT yesterday. Butter milk powder fell 8.6%; milk protein concentrate dropped 7%; butter lost 4.9%; and skim milk powder declined 4.4%.

 

April 15 spot session results:

Block cheese: $2.1975 (up 1.25¢)

Barrel cheese: $2.1675 (unchanged)

Grade A NFDM: $1.91 (unchanged)

Butter: $1.90 (down 3.0¢)

 

Today's expectations:

• Class III, Cheese & Dry Whey to open mixed

• Class IV to open mixed

• NDFM & Butter to open slightly lower

 

Grain futures

Corn markets lagged yesterday despite swelling soy prices. Planting has been delayed due to inclement weather in the Midwest, but traders understand producers can now plant at an astounding pace in a small window of time. Corn prices were down slightly overnight.  Soybeans surged, with the latest report indicating the March U.S. crush was some 5-7 million bushels heavier than many expectations.

 

Today’s expectation:

• Corn to open lower

• Soybeans, meal to open higher

FC Stone's annual Dairy Outlook Conference will be held June 18-19, in Chicago. Visit www.intlfcstone.com/events for information.

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