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

Class III futures largely shrugged off another wave of selling pressure on the spot market to close the shortened Christmas week mixed, on light volume. There’s no doubt that the overall tone is weak, with bearish sentiment weighing on price action and threatening to challenge the recent lows of mid-December in the coming sessions. As historic 2014 heads into its final week, market participants will closely be eying the spot price for direction. Both block and barrel cheese set new lows for the year Friday and established the lowest price levels in well over two years. We look for Class III to start the week mixed.

 Cheese futures shed value and closed predominantly in the red through the first half of 2015 on the heels of an eroding spot market. January cheese futures made a new low close last Friday. The futures market in general has come under pressure since the release of bearish Cold Storage numbers, indicating increased availability at a time of the year where seasonal drawdowns are expected – a likely result of milk flowing into Class III, as it commands a premium to Class IV.  The November Dairy Products Report, to be released Jan. 6, ought to shed some light on just how much milk went into cheese production in November.  

Buy-side interest propped up the dry whey market to end the week mostly higher through early 2015.

Downside pressure in the Class IV market continues, as its components have been shown considerable weakness of late with more risk of lower price action to come. $14 handles are commonplace through mid-2015. The forward curve would indicate there remains the expectation for suppressed values to continue for the foreseeable future, as component pricing exudes bearish sentiment.

Despite the spot price for NFDM holding at $1.00/lb., the downtrend in the futures market remains intact and unabated. From a fundamental standpoint, there is a glut of available product. Buyers continue to purchase hand to mouth.   

Butter futures came under fire to close last week after the spot price traded 2¢ lower, to $1.55/lb. Pressure was seen through the lion’s share of 2015 and there remains further downside price risk as fundamentals unfold in 2015.

 

Dec. 26 spot session results:

Block cheese: $1.4950 (down 3.75¢)

Barrel cheese: $1.4200 (down 5.0¢)

Grade A NFDM: $1.0000 (unchanged)

Butter: $1.5550 (down 2.0¢)

 

Today's expectations:

• Class III & Cheese futures to open mixed

• Dry Whey futures to open steady

• Class IV & NFDM futures to open steady to lower

• Butter futures to open lower

 

Grain futures

Grain markets finished last week mostly in the green, with corn picking up 7¢ and beans tacking on 18.75¢. Farmer selling of corn has been slow.

 

Today’s expectation:

• Corn and soybean futures to open slightly lower

• Soybean and soybean meal futures to open firm

 

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