General Market News

· Draghi says the ECB is prepared to do anything and everything to support the Euro- don’t dare bet on it going away after yesterday’s comments

· Olympics begin

· Asian stocks mostly higher yesterday

· U.S. index futures firm ahead of GPD data

· Europe shares gain on follow through from yesterday

Class III Futures

Negative undertones from Wednesday spilled over into the Class III market Thursday on slightly heavier trading volume.  The nearby months posted not only the lion’s share of the 1,437 contracts that exchanged hands, but also the biggest losses for the day.   September to December prices have flattened out and are edging towards a more bearish cost-of-carry structure.  The market appears to be shrugging off the heat and the ensuing milk production losses we’ve baked into prices so far and favoring instead to pay heed to the lull in demand we typically see this time of year.  This could mean more downside price action in the near term. 

In less bearish news, the combined influence of high beef and feed prices and – at best - razor thin margins on the dairy continue to promote strong weekly cow slaughter figures. For the week ending July 14, U.S. cow slaughter was reported at 57,000 head up 10.5% for the same week last year. 

We look for Class III to open Steady to 10 lower

Cheese Futures

Along with Class III, trading volume for cheese futures picked up Thursday as 77 contracts trading between unchanged and .038 cents lower.  Talk of cheese – both fresh and aged – being offered in the country during a seasonal slowdown in demand is a heavy hand for this market right now.  While the spot cheese market seems remarkably stable lately, the futures market is feeling top heavy.  We expect a reduction in the futures weather premium in the short term.

We look for cheese futures to open lower

Spot Session Results

Class IV Futures

It’s well-bid, but once again no trades for the Class IV market Thursday.  August 2012 to March 2013 finished .12 to .50 higher as Class IV – and the underlying butter/powder prices - continues to converge with Class III prices.  This ought to continue early today.

We look for Class IV to open steady.

NFDM Futures

NFDM futures posted no trades Thursday but continued 2013 buy interest helped raise settlement prices from January to June of next year 1.00 to 2.00 cents. 

We look for NFDM to open firm.

Butter Futures

Butter futures trading volume cooled somewhat Thursday as prices flirt with the $1.70 mark thru July of next year.  While early reports from Oceania are encouraging for milk production, concerns of weather having a material impact on butterfat continue to bolster prices on what appears to be mostly commercial type hedging well into next year.  We look for some choppy trading activity, however, around this $1.70 level.

We look for butter to open mixed.

Dry Whey Futures

Dry whey futures took a breather Thursday with little to no volume posted in the 2012 contracts.  Meanwhile, 2013 contracts finished mixed on what appears to be some slight consolidation.  USDA’s Dairy Market News reported the Central midpoint of the mostly price was 49.5 cents, 0.75 cents higher than last week, while the Western midpoint at 51.38 was 1.63 cents stronger.

We look for whey to open firm.

Grain Futures

Corn futures settled into a bit of a choppy trading dynamic, while soybeans got slammed this week as a wetter forecast has come to fruition for some of the Corn Belt.  Iowa and Missouri received some very welcome rains during the past few days, which have taken some of the edge off the worry in the market.  But it may only be a reprieve as the lack of meaningful rains in other areas will keep traders worried about Monday’s crop ratings and eventual harvest yields. Don’t forget that today is option expiration for August grain options.

Meanwhile demand for corn is taking a bit of a beating as prices rushed to new all-time highs last week.  Old crop net corn sales were actually a reduction of 9,100 tons. New crop sales were reduced by 131,300 tons as China (and another reported unknown destination) pushed back on purchases.

Soybean sales did okay, however, as old crop sales were reported at 193,200 tons, up 14 percent from the previous week. New crop sales registered at 517,300 tons.

We look for corn to open 6-9 higher, beans to open 12-15 higher, meal 4-6 higher, wheat 9-12 higher. 

Robert Chesler