Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
The Class III futures plummet continues for most of 2015. While nearby months turned positive amid stability in spot pricing, deferred (August and September 2015) contracts posted the steepest losses in yesterday’s session. Since Dec. 9, 2H 2015 Class III futures have lost nearly 81¢. The tone is and has been extremely bearish; we are only 75¢ away from $13/cwt. in April, amid chatter of $12/cwt. milk. We’re not saying that won’t become a reality during the first half, but we have to question whether or not this most recent move lower will continue with this type of voracity. With a stable-to-higher spot market, we expect more aggressive buy-side activity in the coming days, especially if short-covering action we see developing gets dialed up.
Cheese futures posted another strong volume day Wednesday, with volume eclipsing 1,200 contracts on a mixed trade. Dry Whey futures finished slightly lower, but are climbing off their recent lows. Look for more strength as futures correct the forward curve, which will also lend a supportive hand to Class III.
NFDM saw a large move to the downside, as spot slipped below $1.00/lb. Growing production, inventories, milk supply and international weakness continue to foster the weak powder environment. We expect significant buy-side interest.
Butter and Class IV followed the NFDM lead. With spot butter’s move lower, it’s looking more likely that we will find support in the $1.30s once this run loses steam. For today, we look for a mixed butter trade early.
Editor's note: To view how yesterday's market activity impacted potential margins under the Margin Protection Program for Dairy (MPP-Dairy), visit http://dairy.wisc.edu/MPP/. Deadline to enroll in MPP-Dairy is tomorrow, Dec. 19.
Dec. 17 spot session results:
Block cheese: $1.6075 (unchanged)
Barrel cheese: $1.5875 (up 1.0¢)
Grade A NFDM: 99.5¢ (down 1.0¢)
Butter: $1.5550 (down 5.5¢)
• Class III & Cheese futures to open mixed
• Dry Whey futures to open higher
• Class IV futures to open steady
• Butter & NFDM futures to open steady to lower
Corn closed higher with help from a strong wheat market. The Energy Information Association reported another new weekly record for ethanol production, which also provided support. Ag Secretary Tom Vilsack confirmed that China has approved imports of Syngeta's MIR 162 corn. The U.S. Grains Council reported the quality of the 2014 U.S. corn crop is good, although test weight is more than 1 lb./bushel below the 3-year average.
Soybeans traded on both sides before closing higher. Meal was again the leader to the upside.
• Grain complex to open slightly higher
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