Morning Dairy Comments, 11/19/2015

Thursday, November 19, 2015

AM Price Movement


General Market News

coming Reports

· We’d like to invite those of you attending the UDI annual meeting to stop by and visit our FCStone booth! We look forward to seeing you there.

· Australian dairy farmers say price of water will soon make their businesses unsustainable

· Astonishing U.S. dividend growth sets record in 3rd quarter

· World stocks continued to climb higher after minutes from Fed’s recent policy meeting strengthened expectations for a rate hike in December

Class III, Cheese, and Whey

Class III settled mixed yesterday, anywhere from down 11 cents to 17 higher. While the path of least resistance has been to the downside, nearby months bucked the downward momentum to settle 12 to 17 cents higher. That being said, this move lower seems more appropriate for late December, rather than early to mid-November, as barrel prices hover just above the $1.40 level. The last time we saw barrels near this level was back in late December of 2014. Should we break $1.42, it would be first time since January 10th 2011. Undoubtedly, the bulk of fundamental news is bearish, however, at these levels we may be a bit overdone, at least on the barrels side.

Internationally, the bearish news is front and center. Monthly milk collections continue to outpace last year, at least in Europe. Total EU collections for September are estimated at 12.17 mmt, a 1.7% increase YoY, and 6.7% above the 3 year average. While NZ collections saw a 7.5% decrease YoY in September, the October Fonterra figures forecast a 4% decrease for the month for New Zealand. Whether or not that comes to fruition has yet to be determined. However, even if we do see another decrease we must remember that there is plenty of product in storage to work through regardless. Low prices are likely ahead of us for the next six months give or take barring any adverse weather event like El Nino throwing a wrench in the mix.

With the U.S. past is peak production, the focus on stock levels becomes increasingly important. From a seasonal perspective we’ve seen stocks decline in American type cheese 9 out of the last 10 years in October. Total cheese stocks have declined the last 10 out of 10 years. Although, we could see a surprise, we anticipate American cheese stocks to roughly be 10% higher YoY. On the production side we expect October to be flat YoY (see full forecast below).

NDPSR, for the week ending November 14th saw blocks average $1.65, a decrease of 1.9 cents. Barrels averaged $1.64, an increase of 3.2 cents. Dry whey averaged 23.1 cents a decrease of 0.4 cents.

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

Class IV, Nonfat, and Butter Futures

Butter futures settled mixed on the day, trading anywhere from -1.000 to +5.000 However, nearby December settled limit up as spot, once again, held at $2.8850. This will be the 9th straight session in which we have seen spot prices remain flat. Regardless, one should note that not a single load has traded in the month of November, with the last trade to have taken place back on October 30th. The last time the market posted an offer was way back on October 13th. In short, we may be sitting here for a little bit if history is any indication of what’s ahead. While we suspect a move lower along seasonal lines, the butter market has continued to leave people scratching their heads. One factor leading to the lack of activity may be the upcoming storage report which should breathe some life back into the spot sessions.

NFDM futures settled mixed anywhere from -1.575 to +0.975. The Q1 2016 pack is now trading at .9040, holding steady at its 2015 lows. Weakness seems to be with us for now. Undoubtedly we could see NFDM, in Q1, fluctuate between 0.90 and the highs of the last six months near 1.20 should we hold these lows.

NDPSR, for the week ending November 14th, reflected butter prices averaging $2.82, an increase of 15.1 cents. NFDM averaged 82.2 cents, a decrease of 5.3 cents from the previous week.

We expect NFDM and butter to open steady to slightly higher.

Spot Session Results



















DOWN 2 ¾


















Grain markets were led lower yesterday by the weakness of the soybeans as the marketplace looks to the export market for any hint of a shift in demand to shake the complex from its bearish posture. The corn market spent most of its quiet session in the red before mustering a late day push to settle near unchanged as market participants work to estimate the true demand for U.S. corn with a strong U.S. Dollar that hinders competitive pricing on the global stage. The soybean market is facing seasonal export sales that are expected to severely drop off as China’s replacement crush margins have fallen below breakeven. Wheat export sales are expected to taper off, putting this year’s exports behind the pace needed to reach the USDA’s annual estimate.

We look for grains to open steady to slightly higher.

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