SPECIAL: Cold Storage Report Insight
Friday’s USDA Cold Storage report showed us that cheese inventories are still below where they were last year. It also showed the seasonal drawdown that is expected this time of year. Having said that, the magnitude of the seasonal drawdown that begins after each year in April was much less this year than last. Last year 130.3 million pounds of the total cheese inventory was consumed April - October. This year that number was just 81.8 million pounds. Cheese inventories may not catch up to where they were last year by the end of this year, but they have been slowly closing the gap.
Class III Futures
Despite seeing yet another down day in the spot cheese market, Class III futures continued to steadily climb across the calendar. It is likely that the support that we are seeing is the result of a large amount of commercial hedging. After paying over $2/lb for cheese for so long commercials are excited to see cheese futures in the $1.7000/lb to $1.7590/lb range for 2015. This short term pop in the Class III market presents a good opportunity for producers to lock in some margins for 2015 that were not available last week.
Spot cheese continues to sell off, but on light volume. Three cheddar blocks and one cheddar barrel traded during Friday’s session. The market still feels like it has more downside, but sellers may be attempting to tread lightly as we move lower. Butter continues to find support as bidders brought the market slightly higher but could find no offers.
Disclaimer: The risk of loss in trading futures and options can be substantial. Past performance is not indicative of future results.