Morning Dairy Comments, 09/30/2015

Wednesday, September 30, 2015


General Market News clip_image002

· U.S. added 200,000 private sector jobs in September

· Russians tell U.S. to remove warplanes from Syria

· Asian currencies have worst quarter in seven years

· Euro-Area inflation rate turns negative as ECB debates stimulus

· Dollar falls against yen as stocks, oil sell off



Class III, Cheese, and Whey

Class III saw slight gains, in nearby months, boosted by yesterday's move in both blocks and barrels.  While nearby months settled anywhere from -1 to +6, deferred months shed as much as 11 cents, although most declines were limited to the first half of the year.  Currently, the Q4 cheese pack is trading at $1.6713, slightly off its recent lows.  Interestingly, cheese futures volume eclipsed that of class III by over 100 contracts. 

Since the beginning of June, Blocks have traded in a 19 cent range. Barrels, on the other hand, have traded in a slightly wider range of 29 ½ cents.

Despite the weak bias, the market seems poised for some choppy trade to close out the month of September.  Production, from what we are hearing, remains on solid footing even in light of heavy supplies. While we expect some fresh holiday buying to come into the market in October, it may not be enough to spur the kind of bounce many have anticipated.  Regardless, with football season upon us, increased pizza sales will likely spur demand for mozzarella. And for now, much of the Midwest has continued to enjoy 70 degree plus temperatures. Chicago for example has seen the warmest September since 1931.  Whether or not that has translated into an extended grilling season is yet to be seen. 

Internationally, recent dry and cool may be hampering pasture growth in New Zealand.  Increased culling in conjunction with slower growth could factor into some production hiccups should the weather continue.  While red flags are not being raised yet, this is something to monitor closely.

Dry whey moved lower for another day bucking it recent upside momentum.  While we may be bottoming out it is important to keep in mind that the whey stream is still healthy as milk continues to flow into cheese.  Q4 dry when is now trading at 27.05.

We expect a lower opening for Class III and Cheese in line with the overnight trade.

Spot Session Results











UP 4







UP 2 ¼














DN 30




Class IV, Nonfat, and Butter Futures

Spot butter fell from grace yesterday, down 30 cents intra-day, which is the second biggest daily drop in spot butter on record (the record is held by March 26, 2014 when spot butter dropped 34 cents).  The spot decline spurred aggressive selling clear through the end of 2016. Nearby October and November traded as much as 10 cents lower during the session courtesy of expanded limits. With yesterday's move in futures, limits will be expanded to 20 cents in cash butter in today's trading session.  All eyes will be focused on spot to see if the steep declines continue.   Regardless, the number of loads that have traded year to date is significantly lower year over year.  YTD roughly 300 loads have traded hands vs. the roughly 700 last year.  This is noteworthy as it is likely further proof that a larger portion of the stocks on hand are currently owned by users – not the manufactures.

NFDM saw some robust gains through the end of the year with futures trading as much as 3.65 cents higher in April 2016 on heavy volume.  389 contracts traded and open interest rose by 252 contracts.  We'll get an updated look at Manufacturer Stocks in tomorrow's USDA Dairy Products report, but trading activity like we saw yesterday is strong for price direction at current levels.  It seems to us that there are quite a few buyers waiting for a supply-inspired price decline for NFDM.  We wouldn't rule out a pull-back on price either, but such a break in our opinion will be much shorter and much shallower than is likely expected.  

We expect a mixed opening for Class IV, NFDM and Butter futures.


Nearby corn gained 2 ¼ cents while beans gained 7 ½ cents yesterday in a pre-stocks report positioning bounce.  Traders, however, are largely expecting the government to show large stocks due in large part to slower exports over the past several months.  We also expect the trade to want to buy any price break off of the report so long as numbers are within the range of estimates.  Look for a mixed opening this morning.


Unless otherwise noted, the posts on this blog should be construed as market commentary, merely observing economic, political and/or market conditions, and not intended to refer to any particular trading strategy, promotional element or quality of service provided by INTL FCStone Inc. or its subsidiaries. INTL FCStone Inc. is not responsible for any trading decisions taken by persons viewing this material. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by INTL FCStone Inc. or its subsidiaries. Reproduction without authorization is prohibited. All rights reserved.

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