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

Follow through selling pressure from late last week hit the Class III market in earnest yesterday, with double-digit losses experienced through mid-2015, and residual weakness permeating through the balance of the year. March and April contracts took the brunt of the heat, each shedding more than 40¢ and putting in fresh contract lows. March settled sub-$15 by the closing bell. The question is where that support lies?

There were a couple of interesting points about yesterday’s trade. First, the move lower took place amidst a higher spot cheese session Both Class III and cheese futures firmed during the spot session, but inevitably both shrugged it off and resumed lower price action.

The second feature that stuck out in yesterday’s trade is the performance of the March and April contracts relative to the nearby months. Though all finished sharply lower, both March and April clearly led the way to the downside, shedding 43¢ and 44¢, respectively. Price action in bear markets typically see the nearby contracts fall harder and faster than deferred months. That was not the case yesterday, as nearby trade took the elevator lower, while March and April jumped off the cliff.

CME Class III Futures, Dec. 15, 2014

 

Close

Daily change

Month

($/cwt.)

(¢/cwt.)

Dec. 2014

17.78

3

Jan. 2015

15.61

-19

Feb.

15.24

-27

March

14.95

-43

April

15.10

-44

May

15.54

-24

June

15.96

-9

July

16.19

2

Aug.

16.52

-8

Sept.

16.81

-5

Oct.

16.88

1

Nov.

16.80

-1

Dec.

16.82

2

2015 ave.

16.04

 

 

Bearish headwinds have and will continue to trump any bullish tidbits that may arise. In other words, the trade is collapsing under its own weight and, as so often the case with commodity markets, targets will be overshot.

Dry whey also succumbed to the weight of the selling pressure with prices tracking mostly to the downside through 2015. The market tone continues to be heavy, as powder prices succumb to building inventory and slumping prices.

Stress cracks in the Class IV complex became more evident yesterday, as eroding spot prices for both butter and NFDM triggered widespread selling pressure. NFDM futures fell into the red throughout 2015. Butter futures also probed lower on the heels of soft spot action that took another nickel out of the price, to $1.84/lb. With seasonal purchasing wrapping up, support for both markets will be harder to come by, which will likely lead to lower prices in search of finding support. 

 The NFDM spot price is flirting with $1/lb.

 

Dec. 15 spot session results:

Block cheese: $1.6050 (up 0.5¢)

Barrel cheese: $1.5775 (up 6.75¢)

Grade A NFDM: $1.0600 (down 2.5¢)

Butter: $1.8400 (down 5.0¢)

 

Today's expectations:

• Class III futures to open lower

• Class IV to open lower 

 

Grain futures

Grain markets traded mixed to open the week, with corn holding onto early gains, but soybeans falling as the market continues to chop sideways after crush numbers failed to spark any enthusiasm.

 

Today’s expectation:

• Corn, Soybean & Soybean Meal futures to open soft

 

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