Markets:

General:

AM price moves: USD +0.119 @ 79.760, Euro -44 @ 1.3176, Crude -0.81 @ 103.20, Copper -0.0630 @ 3.8560, Gold -36.7 @ 1,633.3,  Dow futures -94 @ 13,038, S&P -11.20 @ 1,397.60, NZ Dollar -28 @ 0.8100, Yen +118 @ 1.2176, Canadian -18 @ 1.0045

• Fed minutes were released yesterday with no mention of quantitative easing triggering a sharp rally in the USD and pushing most ‘things’ lower, most notably gold dipped over 25
• The S&P has broken below 1,400 overnight and the Dow is set to test 13k- will they hold? Instinct: yes
• Moody’s lower GE rating
• Australia shows surprising trade deficit in Feb as exports fell 2%
• China official year over year growth tips 8.4% in Q1
• China’s food spending surpasses U.S. as #1
• Eurozone retail sales fell 0.1% in Feb
• Eurozone March PMI confirms contraction coming in at 49.1, below previous month (49.3) and below expectations (48.7)
• Debt worries continue to pressure Spain lower
• UK March services PMI rose unexpectedly to 55.3
• Today’s reports and the week ahead at a glimpse:

http://www.cmegroup.com/daily_bulletin/Section04_Agricultural_Soft_AltInvestment_Futures_2012064.pdf

4/3 Class III Futures:  Volume: 1,625 Open Interest (OI) Change: +178 Total OI: 27,106

4/3 Class III Options:  Est. Put Volume: 214 Total OI:  36,041  Est. Call Volume:  470 Total OI:  32,866

4/3 Other Dairy Futures Volume:   Butter: 99 Dry Whey: 25 NFDM: 46 Class IV: 20 Cheese: 87

4/3 Individual Class III Futures Prices, Change, Volume & Open Interest

April 12         $15.87        UP 3                Vol:   567        OI Change:           DOWN 54

May 12         $15.59         DOWN 22       Vol:   359         OI Change:          UP 92

June 12        $15.81         DOWN 22        Vol:   295        OI Change:           UP 66

April to June Class III Avg.        $15.76             Down $0.13/cwt.

April to June Class IV Avg.        $14.82 Down $0.10/cwt.

Dairy: Class III and Cheese

Spot Markets:

GDT Results Summary:

Prices below reflect the value across all contracts:

• Anhydrous Milk Fat (AMF) average price:  $3,583 /MT ($1.6252/lb) ($1.3028 /lb, adjusted to 80% butterfat)
• Butter Milk Powder (BMP) average price:  No Product was Offered
• Cheddar average price:  $3,371/MT ($1.5291/lb)
• Milk Protein Concentrate 70 average price:  $4,705 /MT ($2.1342 /lb)
• Rennet Casein average price:  $7,290 /MT ($3.3067 /lb)
• Skim Milk Powder average price:  $3,078/MT ($1.3962/lb)
• Whole Milk Powder average price:  $3,227/MT ($1.4638/lb)

Class III prices traded mixed throughout the session yesterday as volume picked up to over 1,500 contracts. Early in the session prices worked their way higher ahead of the spot market. The spot market ticked up ¼ cent on the barrel and the blocks were unchanged. With the gain in the spot market and the staggering jump in contract two on GDT cheddar it looked like the market may have the ammo needed to breakout technically however that didn’t occur today as prices finished mixed led to the downside by May and June, each losing 22 cents, while other months ranged from -6 to +10 as you can see below the market tested the previous highs on the April to June average and once again failed to breakthrough and is starting to look like it might be a strong triple top.

We expect to see some type of movement either confirming a breakout or a continued pullback as we close out the week. With fundamentals continuing to be mostly bearish, we expect that move to be to the downside, even though some chatter has emerged that the next spot move will be to the upside. Backing up our feeling of lower prices to come is that once again as heavy volume came in it led to mostly lower prices on the day and open interest moved in kind increasing by 178 contracts- only April declined in OI.

Class IV activity also picked up a bit today as a total of 20 trades took place all coming from April through July as those months closed steady to 25 cents lower on the day.

Overnight Class III traded mixed on moderate volume with prices ranging from -5 to +4 though only May was lower as total volume was 32 trades. By morning 52 trades took place with prices mixed from -2 to +4.

We look for milk to open soft.

Dairy Products Report Estimates:

NFDM, SMP, WMP:
While the final GDT auction will reflect that prices were higher by 1.5% across all products, neither SMP nor WMP saw price gains as heavy production continues to weigh upon prices. With the moderate losses on GDT NFDM futures traded in a like fashion on moderate volume. A total of 46 trades took place and prices were steady to 0.500 lower. Weekly CWAP prices saw a slight rebound after last week’s heavy volume, on 13.5 million pounds the price came in at $1.3180 up 1.67 cents. News will be heavy today with the dairy products report and weekly price report this afternoon.

We look for NFDM to open soft.

Butter:

Butter futures had a mixed session yesterday with second half months trading lower early in the day ahead of the GDT results. When the GDT results came out however showing a very sizeable gain and rebounding back above the $1.30 level on a US equivalent prices bounced back cutting the second half losses and nearby months turned slightly higher. On the day a total of 99 trades took place with August through December settling unch to 0.750 lower with 85 of the days trades coming in those months. April through July were just the opposite steady to 0.500 higher on volume of just 14 total trades. The rebound in GDT prices came as a slight surprise but the market reaction was far from bullish and thus we wouldn’t expect to see any trend change as a result.

We look for butter futures to open steady.

Dry Whey:

Dry whey futures traded mostly lower yesterday on light volume. Only 25 trades took place with April down 0.900, May unchanged and June through September down 1.000 to 1.250 cents. No month traded more than 6 contracts on the day however. The market will be keeping an eye on this afternoon’s weekly price report for further declines after last week’s rebound back above 61 cents.

We look for whey to open firm.

Grains:

Grains continued to work their way higher throughout most of the day led by stronger old crop corn contracts. Basis levels continue to be very strong with last week’s report indicating tight stocks while farmers turn their attention toward planting. Perhaps basis can get grain out of the bin but we have our doubts that will happen given the seemingly inevitability of continued tightness and justification for holding onto grain given by last week’s report. Soybeans, however, did decline and prices across the board closed well off their highs as a strong USD and weak outside markets weighed. Weather from here forward will likely be the most important influence as the soybean new crop S & D cannot afford any yield losses and old crop corn could really run away if any issues are perceived with the early new crop corn harvest.

We look for corn to open mixed, for beans to open 2 to 3 lower, for meal to open 0.8 to 1.5 higher and for wheat to open 6 to 9 lower.

Robert Chesler