Morning Dairy Comments, 12/24/2015

Thursday, December 24, 2015

General Market News

· Beijing security: ‘possible threat to Westerners’ governments warn

· Oil pushes higher after U.S. crude stockpiles fell by 5.9 million barrels last week

· Deadly storm strikes southern U.S. states

· Starbucks expects record number of gift cards to be sold today

· Fight against palm snares unexpected users: New Zealand dairy farmers

Class III, Cheese, and Whey

Class III and cheese futures continued to move lower yesterday on the heels of recent sharp losses as the bear has yet to relinquish his grip on the trade. That said, a soft spot call that pinned blocks to the $1.40 line failed to unleash another round of heavy sell side action as contracts were loath to stray more than a dime from settlement. Are we looking to carve out a short term bottom here? All things said and done, you kind of have to look at yesterday’s performance as somewhat of a win for Class III as brakes were tapped a bit amidst still impressive volume and a bump higher in the dry whey market, a clear indication that not everyone has yet left for Christmas break.

Volume was impressive for cheese futures as well with over 1,600 contracts changing hands in a session and nearly 1,800 Class III trades occurred. Bear in mind that it’s not uncommon for markets to undergo a short term corrective move after experiencing explosive volume at either end of the price spectrum and it’s entirely plausible that both Class III and cheese retrace some of their recent losses in the event support again materializes in the spot market at current levels. On the flip side, if a $1.30 handle gets slapped on spot cheese then another wave lower is likely in the offing.

For the week ending December 19th, the National Dairy Products Sales Report showed blocks slipping to 1.55 on lower sales volume of 12,860,229 million pounds. The barrel price also came in lower at 1.53 steady sales volume of 10,400,022 million pounds. The dry whey price held steady at 0.23 on stronger volume of 8,333,087 million pounds.

Monthly slaughter numbers came in at 230.3 million head, 5.7% higher than year ago levels but 7.2% lower month over month.

All of us at FCStone would like to extend a safe and very Merry Christmas to you and your families!

We expect Class III, Cheese and Dry Whey to open steady to lower.

Spot Session Results
































UP ¾ 




Class IV, Nonfat, and Butter Futures

Butter futures continue to rip to the upside as futures posted impressive gains through October with limit higher prints in the April contract as well as the July-October timeframe. It’s quite impressive to see the entire 2016 strip north of the $2.00 mark with the exception of the December contract as hedgers remain proactive after back to back record pricing years. We would expect the markets to remain supported on price breaks moving forward with California continuing to be a concern and the new dietary paradigm shift underpinning.  As one customer pointed out yesterday, “butter is the new yogurt.”  We had a laugh, but there’s truth in the sentiment. 

NFDM futures made an attempt at stemming the chronic wave of weakness it has endured of late in the overall bearish trend that leaves many to question where the bottom might be. It’s a fool’s game to try and pick tops and bottoms but if I had to throw out a guess as to where this thing is headed I’d be inclined to lean to the downside. I see nothing out there that would give reason to reverse the trend and feel additional product will be added to the glut that currently exists.

For the week ending December 19th, the National Dairy Products Sales Report showed a sharply lower butter price of 2.46 on weaker sales volume of 2,996,042 million pounds. NFDM came in slightly lower at 0.79 on stronger sales volume of 20,311,023 million pounds. NFDM, Butter and Class IV are called to open mixed.



Grain markets continue in search of that elusive story to move on with conviction but nonetheless remains grasping vainly at thin air. Recent dryness in northern Brazil which has stressed at least 30% of the bean crop has seen some relief of late and without much in the way of other news, the path of least resistance remains to the downside. Fund managers remain short the grains and were small sellers yesterday with the question being will they opt to pressure prices to fresh lows for the move or will they lighten the load heading into quarter and year end? Either way, it appears that prices will continue to be largely range bound with a skew towards the bearish side of things as technical resistance looms overhead for corn and beans remain wedged between support and resistance as indicated by the charts below.  We look for a mixed opening this morning. 

March Corn~Daily


January Beans~Daily


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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