Morning Dairy Comments, 05/16/2017

Tuesday, May 16, 2017


General Market News

· Oil market re-balancing https://goo.gl/huUYMI

· “Fitbits” for cows https://goo.gl/b4eiYn

· Ruling on EU trade deals remains a hurdle for ‘Brexit’ talks https://goo.gl/KPYlSG

· Murray Goulburn names new CFO https://goo.gl/Ohr569

Join us at our 14th Annual
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Chicago - June 8th and 9th

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Class III & Cheese

Class III contracts closed near 3-month highs yesterday on the continued story of a tightness in the physical block market. The bullishness is steaming both from the supply and demand side of things. Production concerns have taken what would have been cheddar cheese out of the supply chain. Most of the concerns steam around 40 lbs blocks, whereas barrels are still believed to be long. On the consumptive side, some cheese makers have reported strong demand for fresh cheese and the lack of excess floating around. Also, off spec cheese seems to being moving at its fast rate in 2017.

Most of the news coming out of the Class III complex in 2017 was bearish. This recent rally severs as a good reminder that despite an “over supply of milk” the market is still constrained to how much of that milk can be processed into end products. Right now that answer is not enough, at least for blocks.

This week Cooperatives Working Together (CWT) reported they have accepted export assistance for 930,351 pounds of cheese, 220,462 of butter to Asia, the ME, and Africa with delivery between May and Aug 2017. 

 

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NFDM & Butter

Butter futures will have expanded limits today and has already traded as high as +8.35 cents in the summer months. Spot butter in Europe has been moving this week around $2.50/lb. after adjustments for volume and currency which should continue to support the domestic market. The dollar is trading at its lowest point since the November election, increases the competitiveness of U.S. NFDM. There was reports of a lot of exports business for NFDM into Mexico getting done last week, as well as production concerns coming out of the southwest with a plant potentially being down. This should strengthen the NFDM market for the time being, but with the recent rally in butter and schools letting out for summer in a couple weeks, this market looks to soften come June.

Grains

Corn planting progress picked up this week coming in at 71% vs. 73% last year and 70% the 5 year average. This is up from 47% last week. Most trade estimates had progress pinned at 68%. With favorable forecasts ahead, the final plant date shouldn’t be too far off. Export inspection came in at 1.39 mmt, up from 0.84 mmt the week prior. Currently the US is on pace to surpass the USDA’s export estimates for 2017 by 4 mmt.

Soybeans posted 32% planted vs. 34% last year and 32% the 5 year average. This was slightly higher than the average trade estimate of 28%. Like corn, exports are on pace to beat the USDA’s estimates despite lower inspections post yesterday at 282 tmt.

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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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