Dairy margins strengthened during the second half of July, thanks to a sharp selloff in corn combined with mixed milk prices, according to the latest CIH Margin Watch report from Commodity & Ingredient Hedging, LLC.
On one hand, the bearishness which has clawed away at the market for the better part of 2015 remains present from both a global scale and a domestic perspective. On the other hand, the last Milk Production report came in lower than expected, and likely served as a warning shot across the bow.
The weather generally remained warmer than average through the report week, as much as 4° Fahrenheit above normal. The warmest temperatures were felt from Texas up through the Midwest, with heat and humidity moving east through the report week.
It was another higher day for spot markets, as cheddar blocks pushed up 4.5¢ and barrels rallied 2¢. Tightness in the marketplace has caused quite the stir in the spot markets, and many are wondering where the sellers went?
While the outlook for U.S. milk prices is bearish, quarterly average prices paid for replacement dairy cows maintained strength in July. And, estimated June 2015 cull cow prices averaged $113.00/cwt., down just $1.00/cwt. from May.
Class III and Cheese extended its rally yesterday, gaining nearly 30¢ in the nearby August contract. While the tone was firm going into spot, futures rallied sharply after blocks and barrels posted strong gains.