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

 

Class III futures posted nearly 1,000 trades in route to a mixed settlement last Friday. February through August 2015 contracts tallied losses ranging between 2¢ and 22¢, while the remaining 2015 contracts managed to settle between unchanged and 15¢ higher. The 1Q 2015 futures pack average dropped 11¢ on Friday to close at $15.56/cwt., while still managing to post a week-over-week gain of 26¢.

Cheese futures shook off the bullish performance of the spot cheese market, succumbing to bearish fundamentals weighing on the market over the past couple months.  January through August contracts settled between unchanged and 1.7¢ lower, while September through December contracts tacked on gains ranging between 0.3¢ and 0.7¢.  The 1Q 2015 futures pack average fell 0.87¢ on Friday, to $1.5840/lb., yet gained 2.47¢ from the week prior. 

Dry whey contracts eased lower in response to bearish pressures in the Class III and cheese markets, settling between unchanged and 1.425¢ lower.  The 1Q 2015 futures pack average settled at 47.7333¢/lb., 0.4333¢ higher week over week.

Class IV contracts settled between 1¢ and 23¢ higher in the March through July contracts on Friday, leaving the remaining 2015 contracts unchanged. The 1Q 2015 futures pack average gained 8¢ to close at $14.52/cwt. on Friday, yet remained unchanged week over week.

NFDM futures settled between unchanged and 1.975¢ higher in the February through December contracts, while the January contract fell 1.25¢.  Production continues to exceed demand as inventories continue to grow, supporting bearish sentiment. The 1Q 2015 futures pack average remained unchanged on Friday, at $1.1425/lb., while gaining 0.875¢ week over week.

Butter futures firmed Friday after an uneventful spot session.  The 1Q 2015 futures pack average added 1.833¢ for the day to close at $1.61583/lb., while adding 1.416¢ week over week.  Butter inventories are increasing, yet demand of late has bested expectations for this time of year, adding credence to the recent bounce in values.

Fonterra released forecasts for volumes in the GDT auctions for the remainder of the year, ahead of the Jan. 6 event.  Product volumes for the next four events remain largely unchanged, with only a slight decrease in SMP volumes during the February events.  For the remainder of the year, Fonterra is predicting a decrease in overall volume of 1.2%.

 

Jan. 2 spot session results:

Block cheese: $1.5700 (up 1.75¢)

Barrel cheese: $1.5400 (up 1.0¢)

Grade A NFDM: $1.0000 (unchanged)

Butter: $1.5550 (unchanged)

 

Today's expectations:

• Class III, Cheese & Dry Whey futures to open lower

• Class IV futures to open steady

• Butter & NFDM futures to open steady to slightly higher

 

Grain futures

Grain markets started the New Year with a continuation of fund selling that aided bearish pressures that pushed the complex lower last Friday. The export sales report was disappointing compared to trade estimates, adding the bearish tone.

 

Today’s expectation:

• Grain futures to open higher

 

The trading of derivatives such as futures, options, and swaps may not be suitable for all investors. Derivatives trading involves substantial risk of loss, and you should fully understand those risks prior to trading. Any reference to past performance is not indicative of future results. All references to futures/options trading are made solely on behalf of FCStone, LLC. All references to swap execution and bi-lateral swaps are made solely on behalf of INTL Hanley, LLC. FCStone, LLC will clear swaps when applicable. Swaps are only available to eligible counterparties. All observations of economic, political and/or market conditions are not intended to refer to any particular trading strategy, promotional element or quality of service provided by INTL FCStone Inc. and its subsidiaries and should be construed as market commentary. All recommendations to buy or sell a specific derivative or forecasting statements regarding market activity and the pricing thereof should be construed as a solicitation in any jurisdiction in where such an offer or solicitation would be legal. Proper context and guidance including but not limited to the particular trading objectives, financial situations and the needs of the intended audience were taken into consideration when this recommendation was prepared. Contact your account representative for specific advice to meet your specific trading preferences or goals. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by INTL FCStone Inc. and its subsidiaries. Sources of information believed to reliable were used in preparing such observations, and no guarantee or representation regarding the accuracy of those sources has been made. INTL FCStone Inc. and its subsidiaries are not responsible for any redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material.