Markets:
General:
AM price moves: USD -0.083 @ 78.765, Euro +23 @ 1.3265, Crude -0.19 @ 104.68, Copper -0.0030 @ 3.8265, Gold -0.8 @ 1,663.4, Dow futures +6 @ 13,161, S&P +1.20 @ 1,394.80, NZ Dollar -38 @ 0.8111, Yen -10 @ 1.2526, Canadian +6 @ 1.0123
· China PMI improved for the fifth straight month coming in at 53.3 in April up from 53.1 in March
· Reserve Bank of Australia made a larger than expected interest rate cut of ½ a point this morning
· British PMI fell to 50.5 in April v.s 51.9 in March despite expectations for an increase to 52.0
· Today’s reports and the week ahead at a glimpse:
http://www.cmegroup.com/daily_bulletin/Section04_Agricultural_Soft_AltInvestment_Futures_2012083.pdf
4/30 Class III Futures: Volume: 548 Open Interest (OI) Change: +89 Total OI: 30,145
4/30 Class III Options: Est. Put Volume: 314 Total OI: 39,186 Est. Call Volume: 130 Total OI: 36,900
4/30 Other Dairy Futures Volume: Butter: 2 Dry Whey: 5 NFDM: 4 Class IV: 0 Cheese: 114
4/30 Individual Class III Futures Prices, Change, Volume & Open Interest
April 12 $15.73 UNCH Vol: 14 OI Change: DOWN 2
May 12 $14.94 UP 6 Vol: 157 OI Change: UP 19
June 12 $14.27 UP 7 Vol: 214 OI Change: UP 6
July 12 $14.74 UP 4 Vol: 61 OI Change: UP 2
May to July Class III Avg. $14.65 Up $0.06 /cwt.
May to July Class IV Avg. $13.79 Down $0.12 /cwt.
Dairy: Class III and Cheese
Spot Markets:
The Class III market fell nearly silent yesterday as the ADPI conference got underway in Chicago, drawing many in our industry from behind our desks and the markets in general. The Class III futures only managed a paltry 521 trades, less than half the volume posted last Friday. The market finished mixed on the day, with gains posted through the August contract, while the later portion of 2012 and early 2013 contracts finished in the red. The third quarter pack escaped the day unchanged, but has fallen15 cents since last Monday and $1.37 for the month of April, as hedgers contend with the continuing ample production seen around the world. The April NASS all-milk price was released reflecting the impact of higher than normal milk production posting a grim $16.90 for the month, down 30 cents from March and $2.70 from April of last year. We expect the selling trend to continue into the early summer months before any sort of substantial rebound materializes. The graph below highlights the predicament many producers find themselves confronted with, as stable to rising grain prices cut into profit margins in the face of the weakness of the dairy markets.
The spot cheese markets’ trading activity slowed on a quiet day, as just four trades posted in the barrels while the blocks were blanked. The barrel trades were accompanied by a single bid and offer, yet no interest on either side materialized for the blocks. The spread between the two widened slightly with the ¾ cent loss in the blocks, leading one to believe the weakness expressed in the barrels with soon spread to the block market in the hopes of lessening the gap between the two.
Class IV ended the month without putting a single trade on the board. The lack of trades didn’t spare the market from price losses though, as June shed 37 cents to $13.49, August lost 7 to $14.35, and October dropped 31 to settle at $14.99. The third quarter pack settled at $14.29 to close out April, down a whopping $1.33 since the end of March.
Overnight the Class III market was relatively quiet with just 5 total trades and prices were steady to 5 higher. By this morning just 4 additional trades had occurred and the market remained steady to 5 higher.
We look for Class III to open mixed.
NFDM, SMP, WMP:
Not much action was seen in the NFDM market as only four contracts traded over three different months. Those months that did trade posted losses ranging from down .250 to down 1 cent as the futures attempt to come more in line with rumored physical market pricing. The outlook for the nonfat remains bearish, as prices must continue to fall in order to draw enough interest to offset burgeoning supplies.
We look for NFDM to open lower.
Butter:
The butter market was able to eke out slight gains in the June and July months, just a .250 of a penny each, on just two trades. The lack of activity was a presumably short lived respite from the heavy selling pressure that has dominated the butter market of late. The second quarter pack has been the epitome of weakness, losing 4.475 cents over the last week.
Butter futures were surprisingly active overnight with 45 total trades occurring and prices were mostly higher with July through December 0.250 to 1.500 cents higher. January 2013 was actually down a penny on three trades however. We look for butter to open mostly higher.
Dry Whey:
Nothing different in the whey market, as only a total of five trades occurred, spread unevenly between the August and September contracts. August was able to manage a gain of .9750 cents on four trades to close at 43.00, while the September contract posted a gain of .4750 to close out at .4750. The whey futures have remained within a choppy, sideways trading range over the last nearly two months. The trade should continue along this path in coming sessions, helping to curtail some of the selling pressure on the Class III futures.
We look for dry whey to open mixed.
Grains:
The grain complex ended the day on a buying spree, as all the markets posted gains on the day. The grains markets have been dragged higher by the strength in the soybeans, as was the case again today. The south American crop is expected by some to be as much as 12% less than the production level of last year. The drop in production has many traders believing that China’s demand will shift to the U.S. to fill their needs. The May soybeans gained 6 ¼ cents to settle at $15.02, while all other contract months posted double-digit gains. The May corn gained 7 ¼ cents, closing at $6.60 ¼, while the May wheat gained 5 ½ cents to $6.47 ¾. The crop progress report was released yesterday showing corn plantings to be 53% complete, a gain of 25% from last week and 26% higher than this time last year. Soybean plantings are 12% complete, gaining 6% from last week and 7% higher than this time last year. We expect the trend to continue, as hedgers and speculators digest this information.
We look for corn to open 4 to 8 lower, soybeans to open 5 to 15 lower, meal to open 1.0 to 3.0 lower and wheat to open 5 to 12 lower.
Robert Chesler