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


After a quiet start to the week, a surge of trading volume followed prices mostly lower for Class III and Cheese futures Tuesday. While we see continued end-user buy-side interest as prices weaken, sellers were the predominant force yesterday.

Following a weaker NZX futures market last week, the GDT price index fell 8.8% Tuesday and brought with it renewed sell-side interest for U.S. markets. The price of cheddar during the GDT auction fell 7.4% to  $1.4186/lb.

Although we continue to see good, two-sided trading activity for U.S. spot cheese, the futures focus is on perceptions of milk and product to come. The May Class III and Cheese futures contracts are now both trading a discount to spot for the first time all year. While the futures markets often follows spot cheese, the fact we see a departure from the trend of keeping premium to spot is worth noting, and portends potential weakness for spot moving forward.

Fresh cheese appears ample in the country. While domestic demand remains fairly strong for this time of year, we’ve got enough cheese to meet both current demands, as well as continue inventory building.

In the very short-term, however, the selling pressure on Class III and Cheese futures could subside and we could see a bit of recovery bounce should spot continue to trade in the high $1.50s.

Still, the negative powder market is a storm cloud over the dairy complex right now. Dry Whey prices finished unchanged under heavier trading. We expect that with NFDM making new price lows, an adjustment for the price of whey is in the cards. 

The Class IV market and products were lower in concert with the weakness seen in the GDT auction. Despite the big declines on GDT futures, buyers were still very active at the CME on mostly lower prices, as both butter and NFDM traded large volume.  Butter prices seem likely to fall in the coming weeks as we put the Easter holiday demand behind us, but futures don't currently seem to buy into that, as we see a carry in the market through the end of the calendar year.


March 17 spot session results:

Block cheese: $1.5700 (unchanged)

Barrel cheese: $1.5600 (up 1.5¢)

Grade A NFDM: 98.50¢ (down 0.5¢)

Butter: $1.6800 (unchanged)


Grain futures

The grain complex traded lower across the board yesterday, under renewed weather pressure. Rains have moved in to the Plains, which may provide some much-needed moisture to wheat, while the Midwest remains dry heading into planting. The Crude Oil market continues to make fresh lows, while the US Dollar Index remains around the 100-mark. Grains are up slightly this morning, but the bounce is weak in nature.

Iowa soil temperatures were reported as reaching up to 45°F in the far southeastern counties as of yesterday (still 38°F in the northern counties), with Illinois temps inched up to 51-52°F.


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.