AM price moves: USD +0.108 @ 78.865, Euro -39 @ 1.3223, Crude -0.70 @ 104.23, Copper -0.0045 @ 3.8155, Gold -2.0 @ 1,662.8, Dow futures -1 @ 13,163, S&P -2.00 @ 1,396.50, NZ Dollar -27 @ 0.8179, Yen +32 @ 1.2477, Canadian -11 @ 1.0173
· S&P downgrades 11 of Spain’s banks
· Australia gains an advance of expected rate cuts as March CPI rose just 0.1% in Q1 short of the 0.6% most were expecting
· Eurozone annual inflation slows to 2.6%
· Germany March retail sales show first rise since Dec11 but Q1 sales down 1& from Q4
· Spain is now officially in recession after it’s economy contracted for the 2nd straight quarter- but you already knew they were in a recession so its about time all the “experts” provided the proof
· Today’s reports and the week ahead at a glimpse:
4/27 Class III Futures: Volume: 1,049 Open Interest (OI) Change: +241 Total OI: 30,057
4/27 Class III Options: Est. Put Volume: 359 Total OI: 39,186 Est. Call Volume: 309 Total OI: 36,972
4/27 Other Dairy Futures Volume: Butter: 47 Dry Whey: 79 NFDM: 44 Class IV: 0 Cheese: 279
4/27 Individual Class III Futures Prices, Change, Volume & Open Interest
April 12 $15.73 UNCH Vol: 26 OI Change: DOWN -1
May 12 $14.88 UP 3 Vol: 219 OI Change: UP 37
June 12 $14.20 UP 2 Vol: 350 OI Change: UP 65
July 12 $14.70 DOWN 5 Vol: 193 OI Change: UP 78
May to July Class III Avg. $14.59 UNCH
May to July Class IV Avg. $13.91 Down $0.04/cwt.
Dairy: Class III and Cheese
UK Dairy Industry Heads Launch Dairy 2020 Initiative
IDFA Disappointed that Dairy Market Stabilization Proposal Stays in Farm Bill
CWT Will Expand to Anhydrous Milk Fat
A lot of news released late last week regarding the future of the dairy industry. New Zealand milk production was up 13% for February, 9.1% when adjusted for Leap Year, with production growth for the season from June 2011 to February 2012 up 10.6%. Estimates indicate that New Zealand’s production had continued to expand strongly through March and April. Australia followed suit with a 2.9% increase in production for the month of March, and a season to date production rate of plus 4.1%. This information reaffirms what we already know, that there is an abundance of milk out there trying to find a home, and pushing product prices lower around the globe.
The Senate Agriculture Committee approved a farm bill draft Thursday that contains supposedly critically-needed improvements in dairy programs, but not everyone is sold on the idea. The IDFA has come out and stated that they are disappointed that the Dairy Market Stabilization Proposal has stayed within the farm bill. Jerry Slominski, senior vice president for legislative and economic affairs at the International Dairy Foods Association, issued a statement detailing his concerns that the bill includes a dairy market stabilization program, which he believes will raise consumer prices, hurt exports, cost thousands of new jobs and stifle investments in new facilities. The bill may still face opposition on the Senate floor before final approval, giving those opposed a glimmer of hope for repeal. You can find additional information on these issues and more within the links listed above.
This week will start with the annual ADPI (American Dairy Products Institute) meeting in Chicago and run into the U.S. Dairy export council meeting on Wednesday. We will have more to report on these meetings and the sentiment throughout the week.
Volume picked up a bit to end the week for the Class III, with 1049 contracts trading into a mixed but mostly lower close. Futures settled from down 17 cents to up 3, as the monthly contracts pulled back from their intraday lows. The market seemed to lack a definitive direction as most dairy markets finished the week with mixed results. The Class III market, along with most of the products, has been under unrelenting selling pressure recently as the fundamental outlook for the complex remains negatively based. Friday’s respite in the near dated contracts from downward pressure seems to be nothing more than sellers’ exhaustion rather than a change in overall sentiment. Any slip in the price stability of the spot cheese markets witnessed as of late, and sellers should jump back into the fray, pushing prices ever lower. But for the moment sellers momentum were quelled because the very wide spread in blocks/barrels was narrowed last Friday in bullish fashion as barrels moved up to do the “work”.
The popularity of the blocks market over barrels continued Friday, with seven trades in the blocks to just one in the barrels. The spread between the two narrowed slightly, but still sits at 10 cents. The blocks were able to gain a substantial boost in interest, as 28 total trades transpired on the week versus zero the week prior. Barrels saw 25 total trades for the week, down slightly from last week’s 31 trades. Despite last Friday’s barrel move upward we feel that the blocks look more susceptible to selling pressure this week.
Class IV finished posting some big losses, but failed to register a single trade last Friday. The greater losses came in the later dated contracts, August through December, with price declines ranging from down 25 cents to down 61 cents. Prices have dropped below those of the correlating Class III months, and should stabilize to start the week.
Sunday night June traded two lower but all other months were steady to 10 higher in Class III, total volume was 55 contracts traded, while CSC and all other dairy products were silent.
We look for milk and cheese to open lower.
NFDM, SMP, WMP:
CWT announced that they will now begin accepting requests for export assistance for AMF, after announcing their willingness to assist with WMP exports, which began on April 16th. The move highlights the current predicament facing producers, as an onslaught of excess product searches for a home. Hopes are high that this export assistance will help to clear away some of the product sitting untouched around the nation, and alleviate a portion of the downward pressure dry product pricing. Last Friday 44 contracts traded within the NFDM complex, resulting in a mixed close, with April the sole month settling higher as the rest settled unchanged to two cents lower. There’s not much new to say regarding this market, excess milk production is being directed towards the more storable products in the hopes that in the long run, prices will rebound amidst an increase in demand. For now, prices in near term contracts remain weak, vulnerable to spouts of selling.
We look for NFDM to open lower.
Butter was mixed on Friday with the trade pricing back some of the losses it had in the previous days. The butter price has been on a steady slide, and the spot market has been on a sporadic sell-off. NASS prices came in at $1.4408 and the CWAP price came in at $1.2576, putting more downside pressure on the butter market. Butter futures continued to move down and the market seems to be pricing in more of the weakness in June and July. The weekly average was down to $1.4378 from $1.5229. Spot took a breather last Friday after plunging below the key $1.40/lb mark last week. We look for more weakness to follow.
We look for butter to open soft.
Whey futures closed out Friday’s session with mixed results, as price changes ranges from down 1.75 cents to .500 cents higher throughout 2012 on a total of 79 trades. The whey market remains content trading in a sideways pattern, as the other dairy products continue to shed value. The conflicting reports released this week, a higher weekly AMS price and a decrease in the DMN, has done little to clarify the future trajectory of the market, but demand remains adequate enough to support current prices for the time being although we suspect there might be a little more inventory building than is clearly evident. We look for more of the same heading into the new week, with prices continuing to trade at or near current levels.
We look for whey to open mixed.
The grain complex finished the week with a strong performance, pushing all grains higher on Friday. Weekend rains in the west are holding back some more corn planting, but the east continues to be well on its way to completion. There seems to be some last minute rationing around old crop corn and that helped add pressure to the upside and in addition great export news with China buying. May corn ended up 40 ½ cents above the previous weeks close. July finished 18 higher to $6.25 ½ and the rest of the grains followed suit. Beans were through the roof on the open, but reeled in some of the early gains with some intra-day profit taking and some burnout after the sharp rise. The bean market continues its steady long term rise, and continues to build momentum. Beans finished up 13 ¼ in July at $14.93 ½.
We look for corn to open mixed, for beans to open 7 to 11 lower, for meal to open 1.0 to 2.0 lower and for wheat to open 6 to 9 lower.