Morning Dairy Comments, 10/27/2015

Tuesday, October 27, 2015

General Market News

· Two day Fed meeting starts today

· China's biggest food company looking at investing in Australian dairy and beef industries

· Milk scandal raises questions over China's new food safety law

· FedEx expects record holiday shipments on rising retail sales

· Obama weighs moving US troops closer to front lines in Syria, Iraq



Class III, Cheese, and Whey

Yesterday brought more of the same; choppy trade on light volume. I see a market that is drifting with no urgency.  Holiday production/procurement hasn't added any nervousness to the market.  Cheese processors seem generally content with regular milk flows and inventory levels.  

Technically we have formed a pennant compressing between support and the lower trend.  At some point relatively soon we should see a breakout.  If we can't surge higher going into thanksgiving we would expect another step lower in the trading range.  Basis November (chart) we can see slow stochastics (SSTO) confusion as the two moving averages oscillate and Relative Strength Index (RSI) being anemic reinforcing our belief that a break-out is coming. 


In this rather range-bound market, the current sentiment is rather negative for price.  It appears to be a foregone conclusion that cheese prices will fall and it's really a debate about 'when' – not 'if'.  While it is a challenge to look at the current inventory overhang and make a case for higher prices, we're unsettled by how negative the consensus is right now.  Either it means we're going to break down faster and lower than anticipated (think $1.20 cheese instead of what seems to be consensus of around $1.40) or that we're near a bottom right now.  We realize that doesn't give much of a crystal ball this morning, but the key is likely in the action of the market over the next week or two.  Watching how we move technically over the next several weeks will likely be pivotal for price direction through the balance of 2015.

We look for class III, cheese and whey to all open higher

Spot Session Results


















UP ¼














UP 1




Class IV, Nonfat, and Butter Futures

Class IV futures didn't bring any more exciting a market.  Butter was a little higher, non-fat was a little lower.  We are seeing active butter production across the nation as cream is readily available.  Nonfat is having difficulty as buyers are purchasing hand to mouth seeing little reason to worry.  Butter stocks are coming down seasonally but higher than the 5 year average and well above crisis levels last year.



We expect a lower opening for NFDM and higher Butter.


Corn markets have gotten rather quiet as of late with very little pressure from the farmer.   Wheat flashed higher earlier finishing up about 18 cents.  We are seeing flooding in parts of the winter wheat area.  CFTC commitment of traders report also showed the funds shorter than markets expected.  Funds bought and estimated 11,000 contracts yesterday.

Soybeans were also a market driven by the funds today as the commitment of traders report showed the funds longer than expected.  Funds sold an estimated 10,000 contracts yesterday.  Interesting to see the beans fall double digits as we continue to see large export inspections and China continue to announce additional purchases.  Better than expected weather forecasts in South America are most likely the culprit.

Look for Wheat and Corn to open lower, Soybeans to start higher.

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.

Market Intelligence Free Trial

Meet the Team

Kansas City, MO
1251 NW Briarcliff Parkway
Suite 800
Kansas City, MO 64116
Tel:+1 (816) 410-5079



Our privacy policy has changed. View our privacy policy to learn more.