Class III futures quiet
By Dairy Herd news source
| Friday, July 30, 2010
Editor’s note: This market commentary is provided by Dave Kurzawski and Eric Meyer, risk-management consultants with FC Stone/Downes-O’Neill, Chicago, Ill.
The CME spot cheese market remained steady yesterday on light activity - only one barrel load was offered and quickly purchased. Class III and cheese futures were also quiet yesterday, trading within a narrow range and finishing mixed yesterday. Little fundamental news and a stagnant spot market are likely culprits for the light volume at the exchange. Overnight, futures are quiet but have picked up steam this morning with prices 1-5 cents higher. Barring any sudden movements in CME spot cheese today, we are looking for traders to continue to consolidate positions and wait for the next news item to drive prices one direction or another. The June Dairy Products Production report is scheduled to be released next Monday afternoon.
July Class Prices will be announced by the USDA later this morning, but with the final Dairy Products Prices Highlights report of the month, we expect Class III to come in at $13.74, UP $0.13 from last month and $3.77 higher than July 2009. Class IV will be announced at $15.75, up $0.30 from last month and $5.60 from a year ago. This marks the fifth straight month where Class IV has carried a premium to Class III.
CME spot butter showed some life yesterday as a buyer quickly lifted an offer at $1.81 at the beginning of yesterday’s session. A seller came back, offered the price back down to $1.8050 where another trade occurred which ended up being the settlement price. Futures took this as yet another positive sign and prices inched up 0.20 to 0.75 cents. In this week’s regional commentary, USDA commented on high multiples continuing out of the East and concerns of butter supply in the future, though not a major problem presently. We still expect high prices to continue in butter over the coming weeks as the market does its best to control limited supply into the fall.
NFDM futures trading were heavy yesterday with over 100 contracts exchanging hands, nearly all of the volume in 2010 months. While sellers have been aggressive in adding coverage over the past few days, buyers have stood their ground and large bids are posted at or slightly underneath the current market. Look for continued weakness today as short-term fundamentals still line up slightly bearish.
After spending six straight weeks below last year, weekly dairy cow slaughter made its way to positive territory. For the week ending July 17, 50,600 dairy cows were sent to slaughter, up 1.2 percent over the corresponding week in 2009, though down 5.3 percent year to date. Region 5 (MI, OH, WI, IL, MN, IN) slaughter totals have been strong over the past five weeks, up over 13 percent so far in July vs. 2009.
Corn and soybean prices have been pulled higher yet again by their wheat brethren and all of the crop loss news out of
http://www.cmegroup.com/daily_bulletin/Section04_Agricultural_Soft_AltInvestment_Futures_2010145.pdf
7/29 Class III Futures: Volume: 503 Open Interest (OI) Change: +205 Total OI: 29,136
7/29 Class III Options: Est. Put Volume: 164 Total OI: 20,988 Est. Call Volume: 155 Total OI: 19,441
7/29 Spot Markets: Block Cheese $1.6025 (UNCH), Barrel Cheese $1.5575 (UNCH), Butter $1.8050 (UP 1/2), NFDM: A $1.21 (UNCH), X $1.2250 (UNCH)
7/29 Other Dairy Futures Volume: Butter: 43 Dry Whey: 7 NFDM: 103 Class IV: 10 Cheese: 4
7/29 Individual Cheese Futures Prices, Change, Volume & Open Interest
Jul $1.456 UNCH Vol: 0 OI Change: UNCH
Aug $1.584 UNCH Vol: 0 OI Change: UNCH
Sep $1.626 UP .003 Vol: 0 OI Change: UNCH
Oct $1.611 UNCH Vol: 0 OI Change: UNCH
Nov $1.58 DOWN .003 Vol: 0 OI Change: UNCH
Dec $1.58 UNCH Vol: 0 OI Change: UNCH
7/29 Individual Class III Futures Prices, Change, Volume & Open Interest
Jul $13.74 DOWN 1 Vol: 28 OI Change: UP 15
Aug $14.92 UP 3 Vol: 68 OI Change: DOWN 2
Sep $15.37 UP 7 Vol: 134 OI Change: UP 61
Oct $14.99 DOWN 2 Vol: 44 OI Change: UP 26
Nov $14.75 UP 2 Vol: 35 OI Change: UP 21
Dec $14.71 UP 1 Vol: 26 OI Change: DOWN 3
Aug-Dec 2010 Avg: $14.95 UP 0.02/cwt
Jan-Dec 2011 Avg: $14.61 UP 0.01/cwt
These data and comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy and completeness. Commodity trading involves risks, and you should fully understand those risks before trading.
Source: FCStone/Downes-O'Neill
