Class III Futures
We’ve already put on our rally caps and we are keeping them on! Good futures volume over 1k contracts traded yesterday as prices rallied but wow, look at the options activity; with over 3k total options total traded and over 1,700 calls it has to get your attention. Lots of Min/Max (collars) strategies being executed with calls being bought as end users and specs alike look to get long but want to leave some room to the downside in case a seller pops into this spot market and stops the bid in its tracks. Look for continuation to the upside as whey appears supported and grains are on a tear upward that some believe could lead to the biggest bull grain market ever - we’ve been saying buy calls on corn for a month, we hope you did but if not go get them soon. CWT announced assistance in exporting 1,100 MT of cheese (2.646 mil lbs.) and 100 MT (220,462 lbs.) of butter.
We look for the Class III market to open firm.
64 contracts traded on the exchange futures as prices held firm by as much as 1.3 cents in July. Cheese options saw 93 calls trade and 33 puts- a solid options volume day for this young market. Spot saw bids alone move the market up and while futures moved up absent of reason for price declines in cheese of milk futures they did trade off their highs post settlement processing in late day Globex markets.
We anticipate the cheese futures to open firm.
Class IV Futures
The Class IV futures market saw no trading activity as prices were all unchanged yesterday. Butter is firm and powder is steady, Class IV remains priced well beneath Class III and will not be likely to garner much attention until that switches.
We anticipate the Class IV market to open flat.
Non-fat futures and spot markets were silent yesterday with no price changes or volume to speak of. The market remains tight on price, we remain fervent in our opinion that inventories are growing but we are yet to see a report confirming this. None the less prices are tight, product is available to end users in bulk deals but tight. Manufacturers are profitable with spot sales above NASS and are happy with this as status quo after many months of losses.
We expect the nonfat dry milk market to open steady.
The spot market fell silent and the futures nearly did as well posting only four trades. The market inventories are abundant on fat as far as we can see. There have been good sales booked previously and thus some, we repeat some, of that inventory is spoken for to be shipped but by all our estimations we have a lot of fat. CWT is helping with some (again yesterday, see above) but we have not seen the recent butter rally as a fundamental one and we feel many see that as well. Thus there is skittishness in the market, a “show me and I’ll react mentality” and yesterday didn’t show anyone much of anything.
We look for butter to open mixed.
Dry Whey Futures
Dry whey futures were firm again yesterday; all in 2012 is well above the 50 cent mark and have been for some time. The price curve is flat in the futures and that simply isn’t right and present opportunity to the patient trader. Look for whey price strength to continue underpinning Class III and Cheese Futures prices.
We look for whey to open firm.
How to perform a rain dance: http://www.ehow.com/how_5519447_perform-raindance.html ; unrealized secret-the rain dance always works because it is done until it rains regardless of how long it takes. In the weather market of 2010 prices rallied 71% starting from June and if we repeated that we could see prices reach $8.67/bu; not saying that will happen but accentuating why we’ve been saying for a month to buy calls. We think now as we thought in 2010 that we would wind up with ample crop (we did in 2010 also) but the weather scares can mean that end users pay through the nose before the supply is proven and prices corrected. Be concerned as the heat wave is prepared to reach 100 degrees with little to no rain just as we are tasseling (making the crop). Technically corn looks a little overbought but we caution you that commodity funds (spec money) has been sitting out for lots of reasons. Funds are long roughly 150k corn contracts vs. a record long position last year of about 498k contracts- so there is a lot of money sitting out that could flood in if encouraged. But if it rains more than expected this weekend, watch out below.
We look for corn to open 8 to 12 higher, for beans to open 10 to 12 higher, for meal to open 5.0 to 4.5higher and for wheat to open 2 to 4 lower.