Markets:

AM price moves: USD +0.126 @ 81.650, Euro -15 @ 1.2709, Crude +0.14 @ 92.95, Copper +0.0310 @ 3.5160, Gold -10.7 @ 1,547.3,  Dow futures +16 @ 12,590, S&P +2.10 @ 1,324.50, NZ Dollar -4 @ 0.7626, Yen -11 @ 1.2448, Canadian -18 @ 0.9863

General:

• Reports suggest the JP Morgan loss might grow- and in other news the sky is blue
• Japan’s economy grew faster than expected with reported 4/1% annualized growth Jan-March
• Draghi wants Greece to stay but they might be gone sooner rather than later- and this comes before even we thought someone would depart the EU- some say chances of “soon” are 60%
• Spanish borrowing costs rose again
• Today’s reports and the week ahead at a glimpse:

http://www.cmegroup.com/daily_bulletin/Section04_Agricultural_Soft_AltInvestment_Futures_2012095.pdf

5/16 Class III Futures:  Volume: 1,361 Open Interest (OI) Change: +105 Total OI: 26,709

5/16 Class III Options:  Est. Put Volume: 340 Total OI:  34,351  Est. Call Volume:  255 Total OI:  31,583

5/16 Other Dairy Futures Volume:   Butter: 67 Dry Whey: 77 NFDM: 75 Class IV: 22 Cheese: 123

5/16 Individual Class III Futures Prices, Change, Volume & Open Interest

May 12               $15.26             UP 1             Vol: 34           OI Change:              DOWN 12

June 12              $15.25            UP 38            Vol: 807            OI Change:             UP 36

July 12               $14.84             UP 11            Vol: 357            OI Change:             UP 46

Aug 12               $15.19            UP 7               Vol: 102            OI Change:              UP 22

May to July Class III Avg.        $15.12            UP $0.17

May to July Class IV Avg.        $13.64 UP $0.02

Dairy: Class III and Cheese

Spot Markets:

The charts look like they might be forming a bottom. The rally however looks like a lot of short covering in Class III and Cheese futures. Nearby months (really only June) are moving aggressively, all others are stagnant of appear to be dragged along kicking and screaming; like a child who has gone boneless not wanting to walk but is being dragged along by a parent. 59% of yesterday’s Class III volume was in June but OI only moved up 36 contracts. We don’t see this really as long term sustainable and neither do the futures based on the action described above. Milk is still abundant, global prices are still under pressure and schools let out soon.

Overnight 25 Class III contracts traded with June up a penny, May down 10, and July down 8. Cheese futures traded 3 times steady to slightly lower and Class IV traded four times at unchanged.

We look for class III futures to open mixed.

NFDM, SMP, WMP:
CWAP number reported to you yesterday morning caused a flurry of futures trades (75) and falling prices. Traders realized the rumored “tightening” last week is unlikely and prices remain under assault in order to move volumes of significance- it’s still a bear out there in powder land. People are buying discounts and it is taking big discounts to get it moved and we fervently believe inventories are still growing.

We look for NFDM to open lower.

Butter:

The spot butter market has moved 5.5 cents from its $1.30/lb bottom but yesterday it finally found sellers as it gained on the day but closed off its highs. Weekly cold storage holdings increased for the 7^th straight week. Buyers have come in buying the substantial price break seeing attractiveness relative to budgets, CWT has contributed to the rally as well but CA milk plants are still full…enough said.

We look for butter to open weak.

Dry Whey:

We look for dry whey to open mixed.

Grains:
USDA said private exporters had reported sales of 900,000 metric tons of corn to China, including 180,000 metric tons for 2011-12 and 720,000 metric tons for 2012-13. Most of that volume was revised from previously reported unknown destinations, but 240,00 metric tons were new sales. Increased ethanol production added support. And on that news the grains bounced upward again. It is a rally we feel to be sold but $6.00 July corn and $5.00 Dec corn are going to be tough levels to break and remain below- end users should be buying some calls on pressured price days.

We look for corn to open 1 to 2 lower, soybeans to open 6 to 8 higher, meal to open 1.0 to 2.0 higher and wheat to open 2 to 4 higher.

Robert Chesler