Morning Dairy Comments, 11/30/2015

Monday, November 30, 2015


General Market News

· GDT auction tomorrow

· Oil prices firm ahead of OPEC meeting

· CDC says Costco E. Coli outbreak likely tied to celery blend

· IMF expected to name Yuan as reserve currency

· Japan industrial output rises for second month

· Russia hits Turkey with sanctions over jet



Class III, Cheese, and Whey

Class III and cheese futures posted mixed results to wrap the shortened holiday week, basically shrugging off a higher spot call that saw the spread converge to 3 cents as what buying enthusiasm that did materialize had little conviction behind it. Demand remains firm yet the trade doesn’t want to overcommit to higher spot pricing, which is reflective that there remains a lack of confidence in the longevity of any sustained bullishness. Granted, the market has been under sharp pressure all month and is due for a corrective bounce as it’s oversold at the moment, but that should remain exactly that-corrective in nature. That said, it would come as no surprise to see the market go into a period of consolidation in more of a sideways, congestive trade before either finding traction and entering into a larger recovery phase, or the more likely scenario would be to resume the current trend and lower trajectory. We would be remiss not convey what we still believe to be a bearish shadow overhanging the current market as evidenced by the heavy inventory levels reflected in the latest cold storage tallies (see chart below).     

For the week ending November 21st, the National Dairy Products Sales Report showed the block price moved higher to $1.66 on increased sales volume of 12,625,224 pounds while barrels moved lower to $1.62 on slightly higher sales volume of 9,903,311 pounds. Dry whey prices came in higher at 0.2316 on increased sales volume of 7,476,381 pounds.

Slaughter for the week ending November 14 was up 5.3% from a year ago, at 59,500 head. Year to date, slaughter is 4.1% higher than 2014 levels, with 2,581,700 head slaughtered. In New Zealand, culling continued during the month of September reducing the total dairy herd even further. For the 12 months to September 2015, NZ cow slaughter rates were 26% higher than the same period a year earlier, leading to a smaller national dairy herd and a reduction in milk production.


We expect class III, cheese and whey to open slightly higher 

Spot Session Results











UP 1







UP 1 ¾  

















Class IV, Nonfat, and Butter Futures

Is the butter market sounding the bugle of retreat? It’s hard to say but it would make sense as stock levels came in much higher than expectations at 179.04 million pounds, cream is reportedly becoming more available, which is working multiples lower, and we’re nearing the end of the seasonal holiday demand cycle. That said, the dietary paradigm shift has likely raised the floor on this market until further notice and a pullback into the $1.80’s will likely be scooped up by hedgers who will undoubtedly maintain a proactive stance on the heels of back to back record pricing years.

The NFDM market looks to temporarily put the brakes on downside price momentum as the spot price is holding in the low $0.70’s and shipments to Mexico are on the rise. We have a feeling it’ll take more than bullish fodder though to realize a rally of substance in the short run as inventory levels remain large and will continue to surge. The trade will be looking at tomorrow’s GDT auction to see if more pressure is brought to bear on international prices, which also likely contributed to the firm tones in the NFDM market to finish last week, in case the expected pressure is not realized.  

For the week ending November 21st, the National Dairy Products Sales Report showed the butter increasing to 2.88 on steady sales volume of 3,307,382 pounds. NFDM prices also edged higher to 0.8495 on increased sales volume of 18,009,440 pounds. CWAP prices jumped 4.6% to $0.8359 on increased sales volume from the previous week of 7.6% to 11,440,863.



We expect NFDM to open higher and butter to open soft 



Grain markets continue to languish in no-man’s land as there’s a shortage of fresh fundamental news to build off of. Technical resistance levels remain unchallenged to the north of current levels and with the strength in the USD, upside potential remains limited. If there is a story to consider it would have to be three pronged in that farmer selling has been meager, which is working to keep basis levels firm, funds are short and if they decided to lighten the load it could prove supportive, and lastly the strength in the greenback. With the ECB looking to go the route of more stimulus and China devaluing the yuan, coupled with the Fed looking to go the opposite direction and possibly raising interest rates for the first time since 2006 and strength in the USD will likely persist, which will weigh on the export market. Export sales slowed over the past week for beans, likely fallout from the perception that Argentina will implement a 90-day reprieve on export taxes however that was quickly dispelled. Corn on the other hand enjoyed strong export numbers as Mexico stepped in and bought 43.8 million old- and 19.2 million new-crop bushels during the week. Yet, the purchase was still not enough to salvage this year’s export program that continues to battle cheaper alternative supplies from South America. For the technical perspective, we’ve provided both corn and bean charts below.

March Corn~Daily


January Beans~Daily


We look for grains to open mixed with corn and wheat slightly lower, soybeans slightly 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.

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