AM price moves: USD -0.186 @ 82.030, Euro +43 @ 1.2634, Crude -0.14 @ 83.13, Copper -0.0020 @ 3.3935, Gold +5.8 @ 1,632.8, Dow futures +24 @ 12,710, S&P +2.50 @ 1,343.40, Aussie dollar +31 @ 1.0071, NZ Dollar +34 @ 0.7904, Yen +30 @ 1.2684, Canadian +20 @ 0.9776
- G-20 vow all necessary steps to save EU
- Spain delays bank audits till Sep
- Spanish borrowing costs rise again to dangerous levels
- German ZEW sentiment index drops most in 13 years
- Today’s reports and the week ahead at a glimpse:
6/18 Class III Futures: Volume: 862 Open Interest (OI) Change: -30 Total OI: 24,682
6/18 Class III Options: Est. Put Volume: 233 Total OI: 32,890 Est. Call Volume: 424 Total OI: 30,860
6/18 Other Dairy Futures Volume: Butter: 63 Dry Whey: 13 NFDM: 0 Class IV: 0 Cheese: 34
6/18 Individual Class III Futures Prices, Change, Volume & Open Interest
June 12 $15.60 DOWN 1 Vol: 103 OI Change: DOWN 61
July 12 $16.42 UP 24 Vol: 257 OI Change: DOWN 65
Aug 12 $17.06 UP 46 Vol: 334 OI Change: UP 20
Sept 12 $17.13 UP 28 Vol: 67 OI Change: UP 15
June to October Class III Avg. $16.65 Up $0.24
June to October Class IV Avg. $14.24 UNCH
Dairy: Class III and Cheese
Milk Production Report:
In our opinion today’s milk production report was neutral to slightly bullish. Total US milk production was up 2.0% over last year against our estimate for an increase of 2.8%. For the first time this year milk production came out lower than estimated as the strong slaughter rate finally turned cow numbers lower month over month and the decline in cow numbers wasn’t overcome by higher milk per cow which was actually lower on a daily average basis. Once again, the previous month production saw a revision to the upside as total US production for April was increased by 35 million pounds from last month’s initial estimate due to both cow numbers and milk per cow increasing from the initial estimate. The thought that spring flush may have come early this year looks to be backed up by the lower production numbers on a daily average basis from April into May. The bounce in futures seen earlier today seems to have priced lower than expected total production number as little change has been seen in futures prices post report. We’d look for some upside follow through tomorrow morning on Class III futures.
Milk production in 23 major states during May was 16.40 billion pounds, up 2.1% from a year ago. Production per cow in the 23 states was 1,924 pounds up 22 pounds from the same month a year ago but showed a decline of 0.9% a daily average basis from April. Cow numbers in the 23 selected states totaled 8.524 million head, a 3,000 head decline from the revised April estimate and the first decrease seen in 2012.
For the estimated all US, May 2012 milk production was 17.625 billion pounds, up 2.0% from a year ago. Milk yield per cow for May was 1,901 pounds per cow, up 22 pounds from the same month a year ago. Cow numbers for the U.S. in May were 9.270 million head down 4,000 head from the April estimate of 9.274 million head which was revised higher by 2,000 head from last month.
Only two of the 23 selected states showed a year over year decline in milk production, Pennsylvania (-2.1%) and Iowa (-1.3%) however a number of states were of interest that showed less than the typical 2.0% increase. Minnesota was unchanged year over year along with Virginia, Vermont and Missouri as most of these states saw a year over decline in cow numbers. Interesting to note that both New Mexico (+1.4%) and Texas (+0.7%) saw an increase in cow numbers but significant declines in milk per cow. California also saw a less than 2.0% increase in production coming in up 1.9%. States showing sizeable gains included Utah (+8.3%), Colorado (+8.2%), Florida (+7.3%) and Arizona (+5.0%).
It was a quiet open to the week for Class III futures as volume was light early in the day and when the spot market opened and closed unchanged you’d expect that futures would have traded in a relatively tight range. However, that wasn’t the case at all as futures caught a bid and moved sharply higher ahead of the afternoon milk production report. Volume was light at just over 850 contracts and interestingly open interest was down slightly but the late summer and fourth quarter months have rallied back near their previous highs. While the milk production report was certainly bullish in comparison to expectations we have to believe much of that has already been priced in leading to us calling the report slightly bullish on futures months and overnight the market responded by trading 7 to 21 higher on solid volumes in the Q4 months while Q3 months were mostly quiet. A number of months have now traded above their old highs and the market is technically bullish from August through December with little resistance above the market.
Cheese futures were surprisingly inactive yesterday with the large gains seen in Class III futures. August futures traded 32 times and the only other trading seen was a 2 lot in Sept. Prices however did rise in line with gains seen in Class III closing steady to 0.049 higher on the day.
As noted above Class III futures were active overnight with prices mixed from -1 to +8 from June through September but higher by 7 to 21 cents from October through January. Volume was heaviest in the October and November contracts as a total of 71 trades had taken place by late night. By morning Class III traded 97 times with June down 2 and all other months 2 to 21 higher. All other dairy markets slept soundly; unlike a newborn baby.
We look for milk and cheese futures to open higher.
NFDM, SMP, WMP:
NFDM futures were quiet once again Monday as the spot market went quiet as well with just a lone offer on the day. While no trades took place prices were slightly higher on futures from steady to +0.750 as buyers got a little more aggressive with class III higher and the GDT auction coming up later this morning. We would be surprised to see further gains in SMP in today’s auction and expect that WMP will be slightly softer as well which may give buyers a reason to breathe a little easier given the recent bounce in futures price.
We look for NFDM to open firm.
The spot butter market was very active yesterday as sellers were the aggressors early offering the market lower down to $1.50 before buyers came back and pushed the price back up to $1.5225 where we closed down 1.75 cents on the day. The spot market price movement became difficult to gauge as we closed softer but well off the lows on the day and futures responded by trading 63 times settling steady to 3.000 cents higher on the day. With the spot market seemingly stabilizing in the low $1.50’s we think futures have likely climbed near their short term peaks as the cost of carry market still holds for butter futures. We have noted that product was in tight hands and the $1.50+ mark has brought that product to the market and we suspect that current levels will appease the buyers as well. GDT prices will come later this morning and as with powder prices given the sharp gains seen on the last auction we think a slight retracement is in order and look for slightly softer AMF prices later this morning.
We look for butter futures to open steady.
We look for dry whey to open mixed.
Scattered showers over the weekend were not enough to fend off the grain market bulls Monday. Solid coverage was seen in the western and northern parts of the corn belt but southern and eastern areas which also badly needed rain didn’t get the coverage expected. When combined with warm dry short term forecasts the market recovered sharply from Friday’s losses. Corn closed up 20 in July at 599.5, 28 in December at 534 dragging wheat along with July up 20.75 at 630.25 and soybeans dragged higher as well with July up 8.25 at 1384.25 and Nov up 25.25 at 1339. Chinese dry weather also has the market fearful that their new crop corn demand will be stronger than currently expected and in combination with a lower US yield this could drive prices higher. Crop condition ratings after the close showed corn at 63% G/E down 3% on the week and soybeans at 56% G/E both of those estimate trail last year sharply which makes it very tough for us to take these ratings seriously in light of the current yield estimates from the USDA. Perhaps the thing that we found most shocking from the CFTC reports is that funds are long just 89k contracts of corn as of last Tuesday while they were sitting at a near record of 458k longs a year ago. The ability of funds to come in and add longs quickly should put fear into grain market bears and estimates were that the funds added some 20,000 longs yesterday alone. Weather and fund buying power leaves us believing end users should have a portion if not a significant portion of new crop hedges in place.
We look for corn to open 8 to 11 higher, we look for beans to open 28 to 31 higher, for meal to open 6.0 to 8.2 higher and for wheat to open 8 to 11 higher.