Morning Dairy Comments, 12/15/2015

Tuesday, December 15, 2015

General Market News

· GDT auction today

· Rio Tinto CEO says Iron Ore rivals “hanging on by their fingernails”

· Emerging mkt stocks and U.S. stock futures advance before Fed meeting as dollar drops

· German investor confidence improved for the 2nd month

· U.K. inflation rose above 0 for the first time in 4 months to 0.1%

“'Twas the night before rate rise, and all through the bourse,
Not a bond yield was stirring, except junk, of course,
The economists were predicting doom, saying beware,
In the hope that Janet would help the bull, not the bear;
The investors all vested in markets seen dead,
While visions of '08 danced in their heads.”


Class III, Cheese, and Whey

Spot cheese buyers emerged from last Friday’s selloff to find value and 5 blocks traded and 3 barrels traded slightly higher as a result, not that futures paid much head. Class III futures were under pressure as the cheese and whey futures curves are at a steep premium compared to spot prices. Whey futures were especially weak on good volume past the 1st quarter.

This morning’s GDT auction results are expected to be firm, as the total volumes offered will be down 3,718mt or down 13.3% from the previous auction. The 12 month forecast for total volumes has been lowered 2.1% to 668,483mt with WMP responsible for most of the declines. Some of the shift out of WMP production will find its way into cheese production and other higher return products.

Fonterra announced that their milk collections in November were down 6% on the North Island, but flat vs last November on the South Island. Total NZ milk production in September, was down 7.5%, and October was down 2.7%. Fonterra kept their forecast milk payout at NZ$4.60/kg, and with dividends estimated at about NZ$0.50, that’s about NZ$5.10 to the dairy farmer.  Average break-evens in NZ are about NZ$5.50/kg depending on debt levels.

Jan-July 2016 Class III Futures:


We expect class III, cheese and whey to open soft

Spot Session Results











UP ¼ 







UP 1 ¾







UP 2











Class IV, Nonfat, and Butter Futures

The nonfat spot market was bid up 2 cents to 79 ¼ with no trades, although there were 7 offers at 82 cents. EU intervention levels are just shy of 85 cents a lb or 1874/mt. The past few weeks Belgium has returned to offerering SMP into intervention. Latvia has continued offering into the program and as well Poland to a lesser degree as they are situated closely to the closed off Russian market.

Spot butter continued it’s descent to $2.07 down 13 cents, although there was a bid at $2.05. Buyers have been sitting… waiting for spot butter to drop. They have been wrong for a long time, and finally now they can step back in now to cover some shorts. Butter futures were bid up strongly across 2016 as the market is expected to stay tight. Canada is importing up to 4,000mt of bulk butter as they are apparently short there as well.

October’s  conventional fluid milk sales were down 1.2% from a year ago. The CDFA revised their reporting instructions and therefore declines in California are being overstated. Conventional whole milk sales were up 5.3% in October continuing the trend towards higher fat consumption.

We expect NFDM to open lower and butter to open steady to soft





Corn traders were covering shorts yesterday, as the funds were short 68,000 as of last Tuesday (yellow line below). Farmers are remaining reluctant sellers which will cause basis to firm up. On the end user side of things, ethanol margins are looking weaker with the continued weakness in oil. Livestock producers are also taking a hit and those factors should keep demand in check. The next big event for grains will be the January USDA report which will start being factored into the markets after the holidays. The focus for corn will be on the December 1st stocks number.

Soybeans were relatively quiet compared to the corn and wheat short covering. Argentina President elect Macri followed up on his promise to lower taxes 5% on beans, and will remove them entirely from corn and wheat. No new news on the Arg’s Peso devaluation.


We look for a soft opening to the grain complex today

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