Morning Dairy Comments, 11/03/2015

Tuesday, November 3, 2015

GDT trade event 151 on today and Futures are pointing to another decrease

Today sees the 151st Global Dairy trade event and the NZX Futures are pointing to another lower event. There has been a clear shift in sentiment, which has seen the strong premiums being paid in the Futures relative to GDT, move to sharp discounts over the past three weeks. The Futures have been performing very well as a predictor of GDT price action over the last few months and we have no reason to believe that will be different this time.

Latest trades in NZX WMP indicate price declines of in the region of 4-5% on average out the curve. NZX SMP is also pointing to declines of about 5% when you compare settlement price of the Nov Futures to the last equivalent GDT C2 (MH NZ) but the settlement price forward curve on the Futures are still at a premium in Feb and Mar compared to the equivalent departure dates on the last GDT, although this premium could possibly be a function of the international arbitrage against the US NFDM prices (see spreads on page 5), rather than necessarily an expectation of higher prices in Oceania. Overall we expect to see the auction today down about 3-4%, with WMP and SMP being down closer to 5% and Butter increasing to claw back some of the losses from the last auction.

Strong trading day on EEX SMP

EEX SMP built on its record trading month in October to trade an additional 690 tonnes yesterday with prices printing higher across the curve as buyers started to see some value after the declines of the last two weeks. May16 SMP was the biggest trading contract where a total of  440 tonnes traded at prices between €1975 and €2000.

Fundamentally the SMP market in Europe continues to look weak and oversupplied, with the likelihood of additional product going into intervention in the coming weeks. However we are still close to what many consider floor levels and as such getting some coverage on a little later in the forward curve is still an attractive proposition for buyers.


General Market News

· GDT Today

· Snapchat's new privacy policy has users outraged

· Google says it could make drone deliveries happen by 2017

· US spent $43 mln to build natural gas station in Afghanistan

· South Korea annual inflation hits 11 month high

· Lacker explains why he dissented at last FOMC vote

· Candy crush company sells for $5.9bln

· Carson overtakes Trump in WSJ poll

· SABmiller to sell stake in MillerCoors 




Class III, Cheese, and Whey

Class III and Cheese continued to see erosion as the path of least resistance keeps pressure on the markets.  Whey futures seemed content to trade both sides of unchanged yesterday.  Whey futures dropped early in October and seem content to trade right around 30 cents (basis 1st quarter 2016). 

Class III futures are technically oversold but trying to consolidate after testing support from September.  Low close in September, and yesterday, was 15.56.  The breakout portion of the 1st quarter class III chart below shows multiple probes below 15.56 but unwillingness to extend.  Seasonal demand "talk" is definitely holding the market back but as mentioned last Tuesday holiday procurement doesn't seem concerning and once those obligations are fulfilled we find very little to excite market bulls.

1st Quarter class III pack average – Daily


A sustained rally in class III and cheese seems unlikely given the current fundamental picture:

Production seems stable (losses in CA. are being offset by growth in the mid-west)

Cull rates aren't expected to increase drastically

Exports are nearly non-existent because of world competitiveness        

Feed costs are stable to declining

Demand expected to soften seasonally

Restaurant performance index down slightly (-.1%) but stable

We look for class III and cheese to open mixed, whey to be steady

Spot Session Results


















DOWN 2 ½







UP 1    












Class IV, Nonfat, and Butter Futures

The market is waiting on GDT today.  Non Fat had most of the action yesterday finishing about 1 ½ cents lower on anticipation of a weaker auction today.  Butter traded mixed and Class IV continues to wish it could be a real boy finishing down slightly in November and February on little to no volume.

Butter demand has pushed futures up to contract highs as we see increased demand going into Thanksgiving and Christmas.  We could see butter disconnect itself from other markets as near term demand pushes prices in the near term but cream is readily available.  There is some resistance to build inventories as butter prices are already pricing lower prices in 2016. 

We expect a lower opening for NFDM, Butter steady

NZX Futures

NZX futures are pricing a 5% lower GDT auction today.  The November WMP contract is pricing $2550 while the last auction had WMP trade at $2694.  1st quarter futures are projecting nearly the same.

December WMP




Markets slipped lower yesterday finishing strongly lower on lack of bullish news.  Corn harvest is 85% complete 6% ahead of the average while inspections are running 24% below last year.  Soybean harvest is essentially done at 92%.  Export inspections were strong again yesterday running 9% ahead of schedule but unable to sway the market. 

Basis continues to strengthen in the cash corn market as farmers are reluctant to sell at current prices.  Funds were net sellers of 9,000 contracts.

Winter Wheat conditions came in at 49% G/E still slightly below the 5 year average but 2% better than last week.

We look for a soft opening to the grain complex today

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.