Morning Dairy Comments, 11/11/2016

Friday, November 11, 2016

General Market News

· The Trans-Pacific Partnership is dead, Schumer tells labor leaders

· Dollar’s Surge sets off intervention across Asia

· Singles Day: Alibaba closes in on record sales

· Canadian dairy sector says $350-million federal aid fund isn’t enough

· Al Gore offers to work with Trump on climate change. Good luck with that.

Class III, Cheese & Whey

Class III futures maintained their uptrend yesterday however, the action essentially, lacked a real sense of urgency. Nearby contracts are in consolidation mode and while they remain at the upper edge of the range, the conflicting signals stemming from the spot market leave more questions than answers. The spread between blocks and barrels widened out to 15 ¼ cents and with the spot equivalent now perched near $18.00, futures remain at quite a discount. The fact that futures posted gains in light of a four-cent downdraft in barrels is not surprising based on this discount. In fact, prices could actually continue to the upside so long as sellers of physical cheese shy away from bringing it to the CME. The trade remains quite skeptical of the sustainability of the recent move and with price action showing signs of stalling at current levels, a double top can’t be ruled out. That said, initial support levels for the December contract were tested Wednesday and held (thin, red line touching the yellow line on the chart below). If consolidation continues for too much longer, we can expect futures to put in another leg higher to close the gap with the spot equivalent. On the other hand, if blocks are pressured to converge with barrels in aggressive fashion, then another test of support in the high $15.00s will likely be in the offing.

According to USDA, the latest commercial disappearance numbers showed American cheese demand in September was 3.3% below a year ago and down 6.5% versus previous-month levels while total cheese use was down 0.004% from a year ago and was 1.6% below the previous month. Year to date, American cheese use is 0.5% higher, and other than American cheese use is up 3.5%, which puts total cheese use 2.3% higher.

December Class III~Daily


We look for Class III, Cheese and Dry Whey to open mostly steady-higher.  


Class IV, NFDM & Butter

NFDM futures clipped to the upside on the back of a push higher on the spot market, which now looks poised to challenge the $0.90 mark, a level that has proven to be solid resistance in the past. The main question here will be if sellers emerge and keep a lid on this thing or if futures are able to muscle up through levels of resistance. Despite recent firming action, prices remain near the lower edge of the trading range and therefore likely have some pent-up energy to propel this thing to northbound to take a peek at longer-term areas of resistance near the $1.00 level for futures.

The butter market looks to be firming as well with a push higher on spot, which could now look for a test of the $2.00 threshold. Futures did post gains yesterday but remain a bit skeptical of the move, as traders don’t appear to be in a hurry to overcommit and aggressively inject premium into the forward curve, leaving nearby contracts at a discount to cash for the time being. That said, plenty of physical has made its way to Chicago over the past couple of sessions, with 21 loads changing hands on Wednesday and Thursday. 

According to USDA, the latest commercial disappearance numbers showed NFDM use gained 3.5% in September and butter demand was 15.04% higher, compared with previous-year levels. On a month-to-month basis, commercial disappearance of butter increased 29.7%, while nonfat dry milk use gained 6.99%. So far in 2016, nonfat dry milk use is down 9.9%, but butter use is 2.2% higher.

We look for Butter, NFDM and Class IV to open mixed.


Grain markets continue to digest the latest from USDA as the old adage “big crops get bigger” is certainly ringing true. That said, corn and beans shrugged it off and pressed to the upside yesterday, led higher by the 7 cent surge in beans, which dragged corn a couple cents into the green. A 15.2 billion bushel corn crop and 4.3 billion bean tally is nothing to sniff at however, demand is strong and expected to remain so which puts quite a bit of pressure on South America to produce. Their planting campaigns are under way and with the latest forecasts now starting to hint at a drier Brazil and wetter Argentina, traders are likely to keep a fair amount of risk premium in the market until more becomes known.


We look for Corn to open flat/mixed, Soybeans are called 13-15 cents higher and Wheat 1-2 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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