Morning Grain Comments, 04/27/2016

Wednesday, April 27, 2016

General Market News

· Murray Goulburn top exec Gary Helou resigns after profit downgrade

· Fonterra supports new digital channel and cream grouping from GDT

· Chobani to give employees a 10 % stake in company

· Test finds Chernobyl residue in Belarus milk



Class III & Cheese

ADPI/ABI annual conference wrapped up yesterday evening and as expected conversations centered on spot cheese and the overall bearish tone of the Class III and cheese markets.  Too much milk and product while buy side interests remain hesitant to venture into the market beyond addressing immediate needs have and will continue to weigh on prices for the foreseeable future.

The spot market finished below $1.40 for both the blocks and barrels for the first time since January 2011.  Class III and cheese both followed spot lower after starting the day mostly flat.  Trading volumes picked up significantly as market participants pressed Class III 15+ cents lower in the June through November contracts on heavier than expected volumes. 

The market is currently reconciling the recent revelation of US milk production up 1.8% during March while the cold storage report showed nearly 1.2 billion pounds of cheese in storage.  The strength of domestic production has forced the most stubborn of bullish optimists to concede that further price weakness is needed to balance the marketplace. 

Spot cheese (blocks-blue | barrels-red)


Plugging spot numbers into our eDairy milk price calculator we get a reference price for class III of $12.52 per cwt, which suggests we have additional weakness possible but given the already depressed nature of the 2nd quarter look to the 2nd half for the additional weakness.   

We look for class III and cheese to lower while dry whey will start steady.

Spot Session Results


















DOWN 4 ¼







UP 1 ½







UP 1




Class IV, NFDM & Butter

The Class III/IV spread for July, August and September were trading at even money Friday morning and closed yesterday at 50, 25 and15 cent premium to class IV respectively.  We have seen US NFDM prices lag world prices which has given support to the futures market recently. Butter continues to lead the market even though cream seems to be readily available in most parts of the country.  We are seeing continued building of butter stocks (243.6 million lbs.) but still below 2013 levels and not printing the all-time record highs like its cousin cheese. 

The CWAP for the week ending 4/22 was released yesterday showing a marginal increase in price of 0.21 cents to $0.7349 while sitting at a level 21.5% lower than during the same period last year.  The estimated sales volume of 10,528,568 lbs. marked a 27.4% decline from the week prior while nearly 61% lower year over year.


The 2016 trend line (green) shows an upward movement in volume albeit at significantly lower prices but increasing on average.

We look for NFDM to open mixed, firm in the nearby months while weaker in the deferreds while Butter will open steady to higher.


The grain markets all moved higher yesterday as funds were buyers across all three markets, adding to their long position in the soybeans while trimming the short positions in the corn and wheat.  The May corn contract added 5.25 cents while the December contract gained 6.75 cents.  The soybeans tallied the largest gains of the day as the May contract gained 18 cents with the November contract pushed 11.25 cents higher.  The May wheat contract gained 8.50 cents with the December contract rallying 9.75.     

Farmers are expected to plant aggressively this week as the weather forecasts have a nice window that will allow them to make good progress over the next two weeks.  South America weather patterns are shifting and should alleviate some of the pricing pressure as drier Argentinian weather should allow the harvest to proceed.  Losses within the Argentinian soybean crop are estimated to range between 2.5 and 8 mmt, but the true extent of the damage won’t be known for some time while news of harvest progress will likely relax the market.


Corn should open steady to 2 cents lower, soybeans down 2-5 cents and wheat down 1-3. 


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