Morning Dairy Comments, 10/30/2015

Friday, October 30, 2015

General Market News

· S&P is up 9% this morning 

· Senate passes debt limit and budget bills

· Ag Secretary Vilsack declines to say no to cuts to crop insurance

· Select Milk Producers to create milk processing plant in Texas



Class III, Cheese, and Whey

Nearby class III and cheese futures markets continued to erode yesterday on a lack of fresh news and a wary eye on a mixed spot market trade.  Block cheese established a new low price print for the month of October yesterday at $1.5875 – ¼ penny below September's low price print as well.  Meanwhile, barrel cheese price pushed up 1.5 cents to $1.5700.  We expect that more cheese will make its way to the exchange, but won't rule out willing and able buyers at current levels. Although the spot market feels somewhat heavy, we don't want to underestimate the buy side interest around the $1.60 mark this time of year. While we don't expect any surprises to the upside, we are still in the throes of holiday orders and see cheese demand as still being on solid footing today. 
It was reported this week that Irish milk production for Oct is set to increase by 20% compared with last year. Eurostat data showed Irish cumulative collections up to the end of Aug were already up 9.2% on the same period last year.
September's milk-feed price ratio in the Agricultural Prices report, as reported by USDA-NASS, of 2.25 was up 0.14 points from last month's 2.11 but 0.71 points below last year's 2.96. The ratio remained above the 5-year average for the twenty-fourth month running as the average ratio for September is 2.13. The USDA-NASS Agricultural Prices report shows milk and input prices used in the ratio were mixed versus last month.


For the week ending October 17, dairy cow slaughter under federal inspection was up 1.6%, at 56,600 head, compared with the same period the previous year. Year-to-date slaughter levels are 3.9% higher than 2014 levels, with 2,346,600 head slaughtered.

Dry whey prices fell yesterday for the second day in a row with noteworthy trading volume.  126 contracts traded Wednesday and 71 yesterday as the trade has trimmed the carry premium amid lackluster cash pricing and continued shifting of production to dry whey and away from higher value whey protein products.  The Central Mostly Dry Whey powder price was up 0.50 cents from the previous week at 20.50 cents, while the Western Mostly price was up 1.50 cents at 22.50 cents. 

We look for a mixed opening to Class III, Cheese and Dry Whey

Spot Session Results











DOWN 2 ½ 







UP 3 ¼ 







DOWN 2 ½







UP 11




Class IV, Nonfat, and Butter Futures

The beat goes on: Butter up and NFDM down.  Spot butter prices are quietly up to $2.70, 23 cents higher on the week and a new high for the month of October with little sign of abating current trend yet.  And it's trading.  7 loads traded yesterday between $2.65 and $2.70.  There is an ebb and flow to the prices up at these levels, but that tells us there is still a strong underpinning demand for bulk butter out there and it has yet to be quelled.
Meanwhile, NFDM fell 1.000 cent yesterday to a new low for the month of $0.81 on 5 trades.  Although the NFDM market appears poised for more weakness yet again today, we do expect the spot price to be supported around this $0.80 mark.  So far we've traded 13 loads of Grade A this week.  The Dairy Market News Western Mostly NFDM price was down 5.00 cents from the previous week at 88.50 cents per pound. Last week's CA Weighted Average price was 88.14 cents, down 3.60 cents from the previous week.

We look for a mixed opening to NFDM, Butter and Class IV this morning.
In advance of next week's GDT there appears to be little sign of positivity as the near months Nov and Dec NZX WMP continue to trade about 2550, which would equate to a drop a 7% drop on C2 from the last GDT auction, with the rest of the curve down 1-5% from the last GDT equivalent.


Corn finished higher yesterday while soybeans put in a fresh low for this most recent move lower.  Both are higher this morning.  With corn harvest more than 75% complete by now some obligatory sales will slow and we see this as basis in the country is increasing in some areas of the country. One of the factors that kept a lid on commodity prices this week was the strength of the dollar.  The U.S. dollar printed its highest level since August on the heels of the FOMC, but was lower yesterday and is lower again this morning.

Look for a slightly higher opening on the grain complex.

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