Morning Dairy Comments, 10/14/2015

Wednesday, October 14, 2015

General Market News

· Dairy Industry Targets Millennial Consumers

· Canada's Dairy Industry Can Compete, Its Farmers Recognize Opportunities

· Gold rises to fresh 3-month high

· Wendy's adding new '4 for $4 Meal' to menu

· Bacardi Group goes 100% solar at Puerto Rico headquarters

· Who Won the Democratic Debate?



Class III, Cheese, and Whey

The class III and cheese futures markets finished moderately lower yesterday when selling increased amid a 1.5 cent decline on the price of both block and barrel cheese.  Weakness in the NFDM market, which appeared to apply some pressure to the dry whey futures, also added to the slightly negative tone of the day.  So that was the tone, but what about reality?  The reality is that the cheese market seems to be in balance right now.

Over the past two weeks, the price of block cheese has traded as low as $1.59 and as high as $1.80.  Yesterday the price of block cheese settled at $1.6925 – nearly the average of the recent high and low price prints.  Domestic demand, from what we can tell, remains intact – particularly for block varieties - and because of this we look at yesterday's spot call as a mild adjustment in a rather stable market as opposed to the beginning of some prolonged period of spot price weakness.  In fact, although it doesn't feel like it today, we'd say the risk is still to the upside for cheese this time of year.

Dry whey futures traded firm out of the gate yesterday, putting in fresh highs for the recent move before tumbling on a lack of real good fundamental reason for such strength.  Meanwhile, a vacuum underneath the NFDM market permitted a swift collapse of powder prices intraday, which also seemed to weaken bids in dry whey.  In the end, dry whey finished yesterday in a mixed fashion with November thru May contract months trading lower, June thru December higher. 
We expect a mixed opening in both Class III and Cheese a lower opening for Dry Whey

Spot Session Results











DOWN 1 ½







DOWN 1 ½














DOWN 6 ¾




Class IV, Nonfat, and Butter Futures

Weakness returned to the spot butter market yesterday as the price fell 6.75 cents to $2.35 – last week's low price – and stopped.  After trading two loads of butter (one at $2.4075 and the other at $2.36), there was a bid left on the board at $2.30.  Chatter seems to be around a freeing up of cream in the country this week, which adds to the slightly negative sentiment around current butter prices.  We don't expect an all-out collapse of butter prices here, however.  We look for more weakness in that market today, but expect buyers to continue to stand in from current levels to about a dime lower.

Stability in the spot NFDM was enough to call the trade to whack away the some of the fat in the forward curve yesterday.  Spot stability doesn't inspire would-be buyers and the recent spot action has called into question big futures premiums of late. Availability of product has created a powder pipeline issue we'll be dealing with well into 2016, but any weakness in the near-term appears to be corrective and limited in our view. 

We look for a lower opening for NFDM, a more mixed opening for Butter and Class IV.

NZX Futures

WMP prices traded lower again during the latest NZX trading session.  SMP and AMF were largely flat.  We expect more weakness in the near-term as the markets appear to be entering a corrective phase – one in which it would not be surprising to see an additional $300 or $400/mt come off.



A strong rally in soybeans buoyed corn prices yesterday. December corn finished up 3 ¾ to $384 ½ while November soybeans finished up 26 ½ cents to $9.14. The soybean market traded higher primarily on Chinese trade data for September. Customs data showing September imports at 7.26 mmt - up 44% over last year's number. The driver of the increased volume is currency based, with the 30% decline in the REAL for the year soybeans into China are very well priced.
We continue to see the grain markets having posted their harvest lows.  Look for a mixed to slightly higher opening this morning.

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