Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
Class III futures continue to show reluctance to stray from current levels. Much of last week’s volatility has been sapped out of the market, despite the persistent erosion in spot prices and trade that is beginning to show early signs of slumber and “holiday mode”. The market has experienced compressed ranges and lighter volume of late, but that might actually be healthy, given the sharp losses incurred over the past couple of weeks.
Bearish headwinds are blowing and could pick up steam moving forward into 2015. The latest downdraft to domestic price sentiment stems, in part, as Fonterra again trimmed its farmgate price from $530/kgMS to $470/kgMS this week. The move is a reflection of the glut of available global supply. Other factors weighing on the market have been well documented, such as the Russian dairy ban, complacent Chinese purchasing as they work through inventory levels, strong production in Europe and Oceania, and a U.S. Dollar index that has pushed to five-year highs, further curbing U.S. exporting capabilities.
Class IV futures managed to post sporadic, incremental gains on the heels of a sharply mixed trade in butter and NFDM markets. However, as the spot price for both came under pressure, nearby contracts shed value and closed in the red.
Dec. 10 spot session results:
Block cheese: $1.5800 (unchanged)
Barrel cheese: $1.4750 (down 1.5¢)
Grade A NFDM: $1.0975 (down 1.25¢)
Butter: $1.9200 (down 6.5¢)
• Class III, Cheese & Dry Whey futures to open steady to lower
• Butter, NFDM & Class IV futures to open mixed
Grain markets came under pressure and slipped into the red after yesterday’s USDA World Ag Supply & Demand Estimates report, which failed to provide much in the way of support despite both corn and soybean carryout numbers coming in short of average trade estimates.
March corn continues to trade range bound, as it has since the beginning of November, shedding 1.5¢ to close at $3.9375/bushel. January soybeans were initially able to break through resistance at the $10.50/bushel mark before reversing to close 17.25¢ lower, at $10.32/bushel.
• Corn & Soybean futures to open slightly higher
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