General Market News
- Trump selects J. Christopher Giancarlo to lead CFTC
- Crude oil prices continue to fall down ~70 cents again yesterday, below $48 for the first time since November
- Despite the lower close yesterday crude prices are bouncing sharply this morning up over $1.00 (+2.1%) after OPEC says they are 91% compliant with supply cuts
- Brexit letter likely coming from UK in the next few weeks, likely to be a wild ride for their currency
Class III & Cheese
It was another day with a lower open and a higher close yet again for the class III market. Perhaps some credit should be given to the spot market which saw the blocks close up ¼ cent but with 4 trades taking place and an offer left on the board that alone certainly wasn’t enough to sustain a class III & cheese futures rally given the sharp premium they still hold relative to the current spot equivalents. Below we include the April to June pack average chart which has seen the market make an attempt similar to what we’ve seen the past few days only to fail and drop once again. At the moment we can’t say this recent strength feels much different than the last few times it’s occurred but certainly we can’t ignore it as gains in the class III futures historically have foreshadowed moves on the spot markets.
Yesterday we wrote about milk production issues out west and while we think that those problems are greater than the USDA reports have shown we also have to step back and realize the physical market should be experiencing those shortages of milk production and yet price action has been to the downside. It would seem lackluster demand for cheese is the factor that we hear cited most frequently as the reason for the weakness and with the spring flush yet to come we struggle to see a very sharp spot price recovery in the coming weeks. Last year we bottomed out in mid-May and rallied sharply might we see something similar again this year?
April to June class III daily pack average:
Settlements ranged from steady to 11 cents for the class III market yesterday with solid volume of over 1,200 trades taking place. Cheese saw over 500 trades take place as both markets remain relatively active from a trading standpoint with settlements steady to +0.007 on the day. After the sharp sell off Monday for whey prices were mixed but mostly lower again yesterday as well on relatively light volume. Settlements ranged from -1.25 cents to +0.650 though volume was under 50 contracts. With the sharp CWAP price drop, details below in the class IV section, we’d expect to see some continued moderate pressure for the whey market again today.
We look for Class III and Cheese to open mostly lower this morning as the NFDM sell off seems to be spilling over into slightly lower pricing elsewhere in dairy markets.
NFDM, Butter, Class IV
NFDM prices were soft to start the session yesterday and though prices recovered throughout the session things were still mostly lower on the day. Volume was very good with over 360 trades on the day and settlements ranged from -1.175 to +0.650 on the day. What happened after the session was the biggest news of the day as CWAP prices shockingly came in down 9.21 cents, to 83.37 cents, with volume jumping to a massive 16.4 million pounds. That’s from 6 million pounds last week and the largest volume seen since the first week of June this past summer. That move on CWAP led to a quick sell off overnight as by 10 PM Chicago time futures were 0.575 to 2.825 cents lower already with volume near 100 trades in total.
Butter futures continue to languish amidst a spot market that just hasn’t moved too much the past few sessions. Despite a gain of 1.75 cents yesterday futures were steady to 2.00 cents lower on the day with volume of just over 100 trades. Maybe this market will be able to catch a slight rally from late holiday demand but the time for that run is drawing to a close over the next couple weeks and as the days pass it seems less likely to occur.
We look for NFDM to open sharply lower with butter steady to slightly lower.
Grains started the day lower but chatter of a purchase from China provided some support under the market and allowed corn to close just a bit higher in a pretty lackluster session. Beans were in an early hole and tried to claw out of it but settled the day down 6.75 cents in May at $9.9925. As we move toward planting time the market is struggling with carryouts that will in all likelihood increase for next year unless we have some type of disaster weather situation playout and that seems to be the driving force behind the recent sell off. Strength in the USD, given the anticipated rate increase later today has also led to some chatter of wide spread commodity liquidation from long fund buyers as well.
Grain markets are bouncing back this morning with corn slightly higher, wheat and beans up 5 to 7 cents.
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