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

Class III futures settled mixed, shaking off the large decline in barrels (-16.5¢/lb.) and a 3.9% increase in milk production growth in October. What gives? The way we see it, futures had not only priced in USDA’s milk production number ahead of the report, but also the recent weakness in spot cheese.  December is now trading at a premium to spot prices – giving market bulls a glimmer of hope that December may be foretelling of s short-term spot market bounce around the Thanksgiving holiday. Butter traded to $1.75/lb., then back to $2.00/lb., so why can’t cheese?

The larger picture is still bearish, and there remains fresh cheese available, so the longer-term trend is lower for both spot and futures. The fact that December Class III and Cheese futures are trading at a premium to spot is also bearish longer-term. 

Dry whey has seen a bit of a bounce as of late, rallying rather significantly off its nearby November lows. 

Down is the word most often associated with NFDM as of late. Undoubtedly the weak tone has been present for some time, both domestically and internationally. With the exception of the nearby contracts, which settled slightly higher as November, and December posting strong gains, heavy volume once again put weight on the NFDM forward curve. The Q1 2015 pack seems to be losing some steam.

Butter futures settled mostly steady to higher on the day.  Spot butter has essentially “flatlined” near $2.00/lb.   Support from some last-minute holiday buying seems to be at work.

Class IV tried to dig out of the trenches in the nearby contracts, with December trading to $17.24/cwt., a price not seen in two weeks.  We could see a bit more of a bounce today, but the trend for Class IV remains lower as well. 

Milk production in the U.S. is humming along.  European milk production is at a low point seasonally, but year-over-year production there remains higher, as well. We hear that Oceania peak milk production may have hit early, but we are not hearing of any milk shortage either.

 

 

Nov. 20 spot session results:

Block cheese: $1.7750 (down 2.5¢)

Barrel cheese: $1.7500 (down 16.5¢)

Grade A NFDM: $1.1375 (down 4.5¢)

Butter: $1.9925 (up 0.5¢)

 

Today's expectations:

• Class III & Cheese futures to open steady to higher

• Dry Whey to open mixed

• Butter futures to open mixed

• Class IV & NFDM futures to open steady

 

Grain futures

Corn values bounced after a four-day sell off on rumors that the U.S. Environmental Protection Agency could announce some news on biofuel mandates in the coming weeks, and stronger export sales. Soybeans also traded higher, regaining some ground after a three-day decline; but exports were lower than expected.

 

Today’s expectation:

• Corn & Soybean futures to open mixed

 

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