Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
Selling pressure from late last week accelerated to open the new year, as the entire 2015 Class III futures strip came under fire and closed in the red on moderate volume. Nearby months took the brunt of the assault, bringing the 1H 2015 average to $15.02/cwt. The February contract led the way to the downside, tanking 50¢, to close at $14.99/cwt. The 2H 2015 contracts did fare a bit better, however bearish sentiment clearly rang through the market after the spot session failed to spark support. Blocks and Barrels started the week unchanged, at $1.57 and $1.54/lb., respectively, in a hint of what’s to come if bullish fodder fails to materialize. The bearish headwinds weighing on the market for calendar year 2015 are clearly present, with continued slippage most likely in store until dynamics shift and traction can be made. Seasonal NFL football demand will wither shortly.
The market will be watching GDT’s auction closely for indications on international price sentiment.
Cheese futures traded lock step with Class III, with 3-5¢ losses common through 1H 2015, and the February contract marking fresh contract lows. We are hearing of increased levels of production.
The Dry Whey market did not escape the lower price sentiment.
Class IV futures traded mixed to mostly lower on the heels of what could be construed as a bearish performance from NFDM, and decidedly weaker tones stemming from the butter market. Nearby contracts are now flirting with $13.00/cwt., yet it should be noted that another leg lower may be in store.
Nearby NFDM futures came under pressure after the spot price was left unchanged. However, the market held relatively steady through mid-year as the trade consolidates near support levels. It does appear that most of the bearishness has been “baked into the cake,” at least for the time being. However, as inventories continue to grow, weaker price action could be setting up in the pipeline.
The path of least resistance was into the red for the butter market, as the spot price traded lower, and futures failed to garner traction. The market is expecting supply to outstrip demand for the foreseeable future.
Jan. 5 spot session results:
Block cheese: $1.5700 (unchanged)
Barrel cheese: $1.5400 (unchanged)
Grade A NFDM: $1.0000 (unchanged)
Butter: $1.5400 (down 1.5¢)
• Class III, Cheese & Dry Whey futures to open mixed
• Class IV, Butter & NFDM futures to open steady to slightly lower
Grain markets posted strong gains to open the year, with technical support sparking fund buying that propelled beans higher. The corn market got caught up in tailwind of soybean strength, closing higher. It also bears mentioning that the Argentinian government has threatened to crack down on farmers who have been hoarding grain by closing their lines of credit in an effort to force them to bring product to market.
The trade will continue to consolidate and position itself ahead of the Jan. 12 USDA grain stocks report.
• Grain futures to open modestly higher
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