“Action speaks louder than words, but not nearly as often.” – Mark Twain
General Market News
· Saudi Arabia and Russia signal oil-cuts extension into 2018 https://goo.gl/ktSbbi
· Chinese dairy advances competing bid for US organic yogurt giant Stonyfield https://goo.gl/9wCLC9
· Ornua aims to make Kerrygold a billion euro global brand https://goo.gl/Z7WpzH
· Domino’s Pizza vows to never cave to animal rights groups https://goo.gl/UtDfka
· Stock futures lower, gold up after FBI Director Comey fired https://goo.gl/X2c3H5
Class III & Cheese
Futures swung about a dime around either side of unchanged on light volume that was relegated to the nearby, May-July timeframe. Blocks held steady at $1.59, while barrels traded 10 loads to $1.46, which tightened the spread a bit but not much. Outside of that, the trade continues in its consolidation mode after the recent push higher. This type of price action is not only quite common after a move like we’ve just seen, but also in many cases, leads to a continuation—in this case that would be to the upside.
You’re probably scratching your head at the suggestion of bullish continuum based on the widely broadcast fundamentals of record cheese inventories and surplus milk. Couple that with the fact that cooler than normal temperatures have kept Midwest grills under their covers. We know the weather will turn at some point and things will heat up, but it’s not barrel cheese that seems to be a little tight – its block. And because of that, we believe that if there is an attempt to close the spread between blocks and barrels, it will be the price of barrels that adjusts higher still.
From a technical perspective, we featured the June cheese contract in yesterday’s morning comment. Some basic technical indicators of moving averages crossing over for that contract hint at bargain hunting and bottoming action. Along those same lines, we’ll shift gears and look at the July-December Class III strip, which is seeing similar “crossovers” on a couple of different fronts. The 10-day moving average (yellow line) is already through the 20-day MA (blue line) and now attempting to violate the 50-day MA (red line). If successful, we’d be looking for confirmation of a double-bottom that could push towards a test of the late March highs. If the market has enough gas in the tank to muscle through those levels, it would project towards a full retracement of the 2017 highs. That’s near $18.00 milk.
For the time being, traders will continue to navigate the “news vacuum” that we’re currently in until GDT hits next week, which will be followed by milk production on Friday and cold storage the following Monday. Until then, it’ll be all about spot and how the spread between blocks and barrels corrects.
July-December Class III~Daily
NFDM & Butter
28 offers on spot NFDM. I’m not sure there’s much more to comment on from there other than that being a lot of powder to sift through. Futures took it in stride though and posted mixed results as the sideways chop continues. There’s just no sense of urgency out there and until GDT shakes out next week, it looks as if futures are content to remain in close proximity to technical, moving averages.
The butter market has enjoyed a nice, stable trade for the better part of 6 weeks. Since the beginning of April the spot market has traded a range of $2.0625 to $2.15. Meanwhile, futures are knocking on the door of technical resistance levels and were unfazed by the lower spot call yesterday, which fell back towards the $2.10 mark.
It’s been awhile since we looked at a butter futures chart. One thing to note here is that so long as contracts are able to show resiliency, it could confirm a short-term inverted head-and-shoulders pattern (forming over the March to May time period), which could easily trigger bullish action towards the 2017 highs.
June Butter –Daily Chart
It’s all about USDA today, as the latest supply and demand numbers are scheduled for release this morning at 11:00, CST. The trade has kept a firm finger on the pulse of the ongoing weather situation, which has been anything but cooperative, but traders have kept emotion in check and stayed away from then panic button as price action reflects the expectation that the crop will get in the ground without much of a shakeup. Fund managers remain bearish the market, which opens the trade up to a bullish, short-covering rally if things don’t go as well as planned. We fully expect USDA to offer up bearish numbers, which will be quickly digested and bring the focus back to weather.
Like butter, the trading range of corn futures so far this year has been rather narrow. There’s only been a 25.75 cent range on the December new crop corn contract since January 1 – and we’re nearly half way thru 2017. Many end-users are covered thru September and October, but we believe end-users ought to use this relative price stability to cover some of their needs for the new crop time period.
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.