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

Class III market slippage continued yesterday, as bearish fundamentals and technical indicators pointing to continued pressure aligned, sending Q3 2015 futures contracts into the red. The fact Q2 2015 is under fire exemplifies the psychology of the trade, with some expectation that ensuing production numbers will prove to be burdensome relative to demand in the coming months.

At current, domestic demand has been healthy, yet prices have nonetheless worked lower as the export arena has been clipped by the rapid and unabated ascent of the U.S. Dollar. Couple that with the precipitous descent of the Euro, and it answers the question as to where the world will turn to suck up demand for dairy products.

There’s concern over how much production will increase in the European Union when quotas end at month’s end, and what impact that will have on domestic prices.

For the week ending Feb. 28, U.S. dairy cow slaughter under federal inspection came in 4.6% lower from year-ago levels, at 58,400 head. Year-to-date slaughter rates are up 3.6%, a 550,600 head.   

NFDM futures price deterioration took a breather yesterday on a light bounce. Put options activity was very active, and there are substantially reduced prices on SMP and WMP from many spots on the map. Ramped-up GDT volumes have most people we’ve spoken with looking for further price declines there. Add the strong U.S. Dollar to the mix and you see why some are talking about possibly retesting NFDM market lows.

Butter futures saw some softness yesterday, which continued into the overnight session.

   

March 12 spot session results:

Block cheese: $1.5700 (unchanged)

Barrel cheese: $1.5450 (down 2.0¢)

Grade A NFDM: 99.50¢ (down 0.5¢)

Butter: $1.7050 (unchanged)

 

Today's expectations:

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

• Class IV, Butter & NFDM futures top open soft

 

Grain futures

Both corn and the soybean complex succumbed to pressure after export sales numbers came in well below expectations. Regardless, the trade is focusing on the South American harvest and confirmation on domestic acreage transitions that should be confirmed in USDA’s Prospective Plantings number at the end of the month. 

 

Today’s expectation:

• Corn & Soybean futures to open soft

 

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