Morning Dairy Comments, 11/10/2015

Tuesday, November 10, 2015


General Market News

· China passes Canada as largest trading partner

· New report suggest October jobs blowout is an outlier

· SeaWorld phasing out Shamu show in San Diego

· U.S. beef exports were down 24.9% in September YoY



Class III, Cheese, and Whey

Blocks were bid up 1 cent to $1.71 yesterday with no offers showing. Barrels moved 2 ¾ cents lower to $1.62 ¼ on 9 trades. The Class III futures continued grinding lower after last week's short lived rally higher. Spot cheese prices have largely trading in a range bound fashion since May from a $1.55 to $1.75. The market is experiencing increased demand especially from restaurant chains, although the supply side is responding.

The I-29 corridor is showing impressive milk production growth as processors are expanding, and producers are enjoying cheap feed prices. SD was up 13.9% in August, IA up 4.1%, MN up 4.2%.  Wisconsin showing a solid 4.8% gain. Out West, we had California down 3.1% in August. Milk production growth in the West has been much more conservative reflecting the fact producers have much more exposure to powder prices than the Midwest.

In August, cheese inventories remain heavy as the export markets are slow. In September cheese exports were down 20.3% from 2014. Year to date, cheese exports are down 15.4% from 2014. New Zealand has increased mozzarella capacity and will compete for business in the Asian markets. 

Spot Block/Barrel average:


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

Class IV, Nonfat, and Butter Futures

The Class IV market was firmer yesterday on the back of quiet spot markets in both nonfat and butter. Nonfat futures were firm as short covering seemed to be the case. September's export numbers came in at 47,482 mt up over 15,000mt or up 47.5% vs 2014. The majority of the increase can be credited to Mexico as they doubled their purchases vs last year in September to 27,000mt. Mexico is a price conscious buyer, and clearly took advantage of low prices to rebuild their inventories, and they have bought 52% more from the US so far in 2015.

According to GTIS China has been importing WMP below both 2013's and 2014's pace. In September China imported 13,500mt which was 42% above last year, but was still way off of 2013's pace of 26,000mt. With China still largely out of the picture in the markets where will all of the product be absorbed? Exports to South East Asia are off as we are seeing much more competition from Oceania and Europe. Chinese imports were down nearly 20% in September and they attributed it to weaker economies in the surrounding countries...not a good sign for demand.

Yesterday butter silently closed at $2.88 ½. Futures firmed up to add some premium to the drastically discounted futures curve. According to AMS conventional whole fluid milk sales increased 4.3% in August and are up 3.7% year to date. That's impressive considering conventional fluid milk sales are down 1.5% year to date.

Spot Butter:


We expect NFDM to be higher, butter steady

Spot Session Results











UP 1







DOWN 2 ¾


















NZX Futures

Whole milk powder futures grinded lower yesterday and are consolidating in the $2,220-$2,400 range as the market has found some support after last week's GDT showing 8% declines on both WMP and SMP.

SMP futures shed more premium yesterday as the market is weak and is converging with cash prices in the $1,800/mt neighborhood.

January 2016 WMP futures:



Wheat led the charge lower falling 20+ cents on continued weak exports which also triggered additional technical selling with the funds selling an estimated 12,000 contracts.  Exports inspections are running 18% behind last year.   Trade is expecting the USDA to make significant reductions in the export expectations. 

Corn fell 6 cents; also on continued weak exports.  Inspections were a measly 295.7 tmt with expectations coming in between 475-600 tmt.  2nd verse same as the 1st:  Trade is expecting the USDA to make significant reductions in the export expectations.

Soybeans traded both sides of unchanged as it is being pulled in multiple directions.  Exports continue to be strong as China being the most significant player but with more stringent inspections and sales programs it looks as if they may be searching for cheaper South American beans.

USDA WASDE will be released at 11 pm central.  

We look for grains to be mixed with only very small price changes.


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