Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
Class III futures prices traded in the tightest daily range in recent memory, with most months trading within a 20¢ range on the day. Volume was still very heavy. Settlements ranged from -2¢ to +5¢ through the end of 2015.
While the trend remains down, there is a bit of an argument to be made for a short-term bounce in the Class III six-month pack (January to June 2015), as prices have stabilized over the past several sessions. However, the spot market will need to give us a bit of a push to get there.
Dry whey prices continued their recent sell-off, with prices moving very near, in some cases just below their recent lows. It may be difficult for this market to regain its footing in the short term, as the outside markets continue to be mostly weaker.
The Class IV market was relatively quiet yesterday, with settlements mostly unchanged but slightly higher in December and the Q4 2015 months. Product prices have been a mixed bag of late. As we get nearer the holidays, the likelihood of a spot butter sell-off increases, but the market still seems to have good demand and the spot price is stable so far this week.
NFDM markets were mixed, but mostly higher yesterday. While we continue to hear a lot of talk of the possibility for a sub-$1.00/lb. spot price, futures have been bouncing back a bit of late, perhaps due to the spot market finding a little support and stabilizing over the past two weeks just above the $1.10/lb. level.
Dec. 9 spot session results:
Block cheese: $1.5800 (unchanged)
Barrel cheese: $1.4900 (down 3.25¢)
Grade A NFDM: $1.1100 (unchanged)
Butter: $1.9850 (unchanged)
• Class III, Cheese & Dry Whey futures to open mixed
• Butter, NFDM & Class IV futures to open mixed
Both corn and soybean futures prices were higher, finding some support from a strong soybean meal market, and some concern ahead of today’s USDA World Ag Supply & Demand Estimates report. We don’t look for much of a move based off the report later this morning, as no supply side changes will be made and USDA will likely await stocks data after the first of the year before making any significant changes to that side of the balance table. It’s getting harder to see any breakout of the current trading ranges for corn and soybeans until after the holidays.
• Corn futures to open slightly lower
• Soybean and Soybean Meal futures to open slightly higher
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.