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Morning Dairy Comments, 10/28/2016

Friday, October 28, 2016


General Market News

· GDP hits 2.9% in biggest gain since mid-2014 https://goo.gl/XfdYPo

· Slowing milk out to fuel dairy price rally into 2017 Rabo says https://goo.gl/lhKjl7

· European stocks fall on earnings as bond rout eases, metals rise https://goo.gl/BPcKm8

· US Treasury yields hold higher after note sale https://goo.gl/70cDmK

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Class III & Cheese

Markets quietly moved higher yesterday maintaining the generally higher tone to futures this week. Initial weakness off the cold storage report Friday afternoon seems to have been faded by the market with many believing the high inventories have already been priced into the market.  Spot offered little direction as blocks remained steady while barrels dropped ¾ of a penny. 

For the first time this year, we see US cheese prices at a discount to the world.  Prices published by the USDEC showed a 23% drop from September.

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Given US production strength and high inventory levels, a discount to world prices seems warranted and should help to clear additional inventory into the market. 

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

 

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Class IV, NFDM & Butter

Butter started out of the gates racing higher finishing up 6 cents in the November contract.  Are we seeing the start of last minute holiday buying?  We’ve discussed in previous Early morning updates that we felt buyers have been much more proactive this year and the previous year spikes would be muted.  It would not surprise us to see spot butter with a 2 handle but maintaining that price may be difficult.  Nonfat traded mixed yesterday and will continue to eye spot for direction.

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The US nonfat price is at discount to EU/Oceania prices which should help to clear more NFDM into the export market.  The chart above highlights the prices between US/Oceania/EU and gives us an idea of competitiveness in the world. 

We look for butter to start higher, Class IV and NFDM steady. 

Grains

Technical strength seemingly driven by fund buying pushed grains again yesterday with soybean meal leading the way.  January meal is up 30 dollars from the lows earlier this month accelerating higher after breaching the 50-day moving average on Wednesday.  The 100-day moving average looms just above yesterday’s close at 335.

Corn shook off a weaker export sales number to finish higher on technical and general grain strength.  Soybeans finished higher but 6 cents off its highs as producer selling came in just above the 100 day moving average.

The FCStone grain recap from yesterday pointed out basis is falling as elevator continue to lower their bids as their facilities fill up.  Strong export sales in the wheat market helped to push the complex higher. 

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We look for the grain complex to start the day lower.

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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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