Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
Class III saw a bounce yesterday, with futures settling from 1¢-24¢ higher after an uneventful spot cheese session. While not a reversal of the trend, the recent downward spiral was subdued ahead of USDA’s Milk Production report, which we expect should show total milk production 2.1% year over year. Production growth will be limited in part by a fairly reserved increase in cow numbers, as diminished profitability has cooled producers’ herd expansion plans.
Fundamentally, little has changed, with a healthy milk supply keeping up with better than average demand. Yesterday’s bounce is likely due to some short covering rather than aggressive end-user interest.
Butter futures settled mixed yesterday, within a 1¢ range of the previous day’s settlement prices, as the spot session failed to provide inspiration to the marketplace. Increased Easter demand should be all but over at this point. While last-minute orders are not unusual, the path of least resistance in butter should be to the down side. Weekly cold storage reflects a slight decrease of 2.1% from the week prior.
The National Dairy Product Price Report for the week ending March 14 reflected an increase of 3.8¢ in butter, averaging $1.72/lb. NFDM also saw an increase, gaining 2.8¢ from the previous week, averaging $1.07/lb.
Fundamentally little has changed. NFDM is plentiful as production increases along seasonal lines. Inventories continue to build and buyers are a bit “gun shy” in terms of locking up anything longer term.
Quick market snapshot:
• Total U. S. cheese exports were down 26.0% in January versus 2014. American cheese exports down 57.4% in January versus January of 2014.
• Butter exports were down 82.1% in January compared to the same period last year.
• February stocks are expected to grow seasonally in cheese and butter
• U.S. February milk production is forecast to grow 2.1%.
• Two straight weeks of lower dairy cow slaughter.
• Good rains fell across the North Island of New Zealand, but it looks like South Island missed out. Probably too late help this season out much, but should provide moisture to help with start of 15-16 season.
• Australian milk production rebounded in January, up 0.6% for the month. Season to date is 2.4% higher.
March 18 spot session results:
Block cheese: $1.5700 (unchanged)
Barrel cheese: $1.5450 (unchanged)
Grade A NFDM: 99.00¢ (unchanged)
Butter: $1.6800 (unchanged)
Corn settled up 3.75¢ while beans moved 10.5¢ higher in the nearby May contracts. Corn markets were choppy most of the day, only to firm after the Federal Reserve announced that it may hike interest rates in June, leading to a severe decline in the U.S. Dollar Index, while supporting commodity prices in general.
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