Morning Dairy Comments, 10/01/2015

Thursday, October 1, 2015

General Market News

· ConAgra moving headquarters to Chicago

· Syria conflict: Russia launches fresh strikes

· Whole Foods says it will stop selling foods made with prison labor

· Autos, dairy, IP still sticking points for TPP deal

· Yili teams up with Cornell University on cheese for China



Class III, Cheese, and Whey

Values in both Class III and cheese moved higher in yesterday's session.  Class III settled anywhere from +2   +11 on modest gains seen in spot.  Volume continues to be light as we near the end of the fiscal year.

In the short term, we expect our markets to remain domestic driven markets.  Although markets have been insulated, focus will shift to New Zealand as production ramps up.   While there are no major problems report thus far, weather continues to be a concern going forward in this strong El-Nino pattern.    With most of the major reports behind us the markets will look to spot for direction.  Generally, speaking stock levels are healthy across the board.   Cheese inventory levels and production have been healthy.  But holiday demand ought to support prices around current levels.  Also supportive of the market are rumors of increasing Chinese powder buy-side interest (or the potential of).  China has been relatively quiet for some time and, while there seem to be plenty of problems with their economy, they've been making waves in the grain complex since Xi Jinping's visit to the U.S. last week.  Some of that water may have spilled over into dairy.

Dry whey saw mixed trade yesterday with all of the activity occurring through Q1.    While whey has seen an uptick as of late it may be too early to call this a trend.  That said, only time will tell.   However, cheese production remains healthy which should provide a healthy stream of whey. 

NDPSR, for the week ending September 26,th averaged $1.72 per pound for blocks, a decrease of 0.2 cents from the previous week.  Barrels averaged $1.64 per pound, a decrease of 4.6 cents.   Dry Whey averaged 23.4 cents.

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

Spot Session Results











UP 4







UP 1¼







UP 2  







DN 24




Class IV, Nonfat, and Butter Futures

Butter, yet again, saw a mammoth move to the downside with spot butter losing 25 cents intraday and settling just off the lows at 24 cents lower or $2.51.  A bid for 20 loads at $2.5100 drew a line in the sane in the low-$2.50's and helped stave off a massive collapse of futures prices (futures still closed mostly lower – but a massive collapse did not occur).  Thus far, spot butter has shed 62.5 cents since reaching highs on Friday.   Some seem to have been caught off guard; though many expected a move lower, it has been the speed in which we have seen this market decline leaving some scratching their heads.  So was there some tremendous shift fundamentally?  Not from where we sit.  But record price levels tend to beget record swings as emotion and uncertainty ramp up. 

We reported yesterday that the largest single-day decline for the spot butter market was 34 cents on March 26, 2004.  We were wrong about this.  The largest single-day decline in this century was actually 9 months later when spot butter lost 40 cents on December 10, 2004.  But if you really want to dig through the history books you'll find a larger decline on November 20, 1998 when the price dropped 42.5 cents from $1.7500 to $1.3250.  Of course, this was back before YouTube and iPhones and Y2K - when the spot call for butter happened only once a week.

NFDM continues to trend higher, gaining as much as 1.5 cents in January.  As mentioned, whispers of Chinese participation have been floating around the marketplace.  Credible or not it seems that it may be enough to those with upside price exposure interested in locking in some sort of need going forward.   Others may have buying value as we seemed to have bottomed out.   Needless to say, the tone has been firm and we expect that to continue in the short term.

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

The grain complex took the Quarterly Stocks report in stride yesterday breaking slightly after the report but regaining footing led primarily by soybeans.  As you can see below, the USDA trimmed soybean stocks yesterday but the trade was initially reluctant to buy off the report because it wasn't necessarily reflective of current demand – but rather last year's crop was reduced more than expected.  Nevertheless, prices found support and began to push higher by the closing bell. 


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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