Morning Dairy Comments, 11/29/2016

Tuesday, November 29, 2016


General Market News

· In a move that should surprise no one the OPEC deal is now in doubt. Despite a higher close yesterday the market is down nearly 3% this morning

· Attack injures 9 at Ohio State University

· South Korean President says she is willing to resign

· FrieslandCampina announces December milk price up to 37,50 euro per 100 kilo

· Synlait increases payout price: https://goo.gl/eziYkP

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SPECIAL NOTICE:

· On December 5, the order of spot market sessions is changing. Because spot NFDM will trade electronically, the order is amended as follows:

CHEESE:          10:45-10:55 AM

BUTTER:          11:00-11:10 AM

NFDM:             11:30-11:40 AM

Please note, this is the first phase of changes. There will be other time changes to the spot sessions once butter is listed on the electronic platform, and then again when cheese is listed – both of which will happen sometime in Q1 of 2017. Please call or e-mail with any questions whatsoever.

Class III & Cheese

What was prevalent amongst both buyers and sellers yesterday was the remnants of tryptophan in their systems. Class III and Cheese futures got off to a sluggish start and stayed behind the eight ball for the remainder of the day. Class III futures volume was around 700 contracts; cheese futures stood just under 100 trades. Whey futures opted for the ham rather than turkey over the weekend and was able to hit the ground running Monday. Whey Futures volume was greater than Cash-Cheese for only the 3rd time in over a year. Whey has been putting together quite the rally since the start of November as the Q1 pack has gained 4 cents during that time. This comes in wake of continued strength of Chinese buying, showing an increase of 9% vs. Oct 15 and 15% increase YTD. Chinese imports usually trend lower this time year, but have been on fire as of late; coupled with the seasonal draw down in domestic production and stocks, makes a perfect recipe for a rally. It is hard to imagine that additional moves higher will be warranted as inventories, and production should start the seasonal upswing in the coming weeks.

Fresh news for block cheese has been hard to come by, unlike fresh physical barrels. There have been reports the tightness the market was experiencing has subsided. The long holiday weekend more than likely caused additional loads of cheese in need of home, which may make their way to the spot session this week. Last’s weeks NDPSR reported showed Block volume at its highest level since the last week of Aug, which was also the last time prices reached +$1.80/lb on the report. If sales have indeed slowed down as reported, prices should erode on the spot market and in turn futures.

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

 

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Class IV, NFDM & Butter

Spot NFDM jumped 1 ½ cents higher yesterday, its largest single day move since Nov 15th. Futures finished mostly higher on light volume. The market has been range bound for quite some time with sell pressure firmly established at 95 cents. We are not there yet, but there does not seem to be a lack of product making its way to the CME. For now, the trend is higher, but as mentioned this market continues to look range bound and we struggle to see a breakout move coming for now.

Although Dec to Feb butter futures closed 2-5 cents higher yesterday, the move happened with less than 20 trades. Spot did indeed close 5 ¼ cent higher to $2.10, but the move this late in year does not have the same implications of a rally in mid-October. In fact, any additional rallies should be met with skepticism. The double digit gains in inventories surpass that of demand growth. Indeed last year we came into Dec with a spot price of $2.90, however this year we are sitting on 27% more inventory, the

We look for a higher open this morning for NFDM, butter and class IV.

Grains

Soybeans blew through technical levels of resistance yesterday on its way to its 7th consecutive higher close. Managed money is estimated to have added 52k contracts to their net long position on beans during that time. RSI remains in oversold territory, but strong exports continue to fundamentally support the market. The current marketing year’s total exports stand at 24,006 MT compared to 20,159 MT LY. Corn exports have almost double vs. LY. This year’s total stand at 12,539 MT, but has done little to deal with the mountain of supplies in the U.S. Expectations are for exports to slow down once the S,A. season is underway. Weather conditions in Brazil and Argentina remain favorable.

Look for a weak opening on a turnaround Tuesday for the grains. 

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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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