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Dairy markets: Cheese, butter prices bounce


note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.

July 23 spot session results:

Block cheese: $1.7025 (up 4.75¢)

Barrel cheese: $1.6750 (up 3.0¢)

Grade A NFDM: 70.50¢ (down 3.5¢)

Butter: $1.9225 (up 4.75¢)

Class III and Cheese futures shrugged off an arguably bearish Cold Storage report and turned higher during a session that shifted focus back to the spot call.  Block cheese pushed north of $1.70/lb. again. Barrels, too, pushed higher, but met some resistance at $1.67/lb.

The spot activity sent a surge of buying – mostly short-covering – into the futures markets that exploded nearby prices by as much as 55¢ on Class III and 6¢ on cheese.  Prices recoiled shortly thereafter on a fresh bout of selling in the NFDM market, which pushed the Grade A spot call to another new all-time low.

So what caused the bounce in spot cheese?  In short, domestic demand for the best priced cheese remains strong.  Although there appears to be fresh cheese available, there also seems to be some rather nuanced pricing in the country, causing vibrations to the CME spot market. Any way you look at it, we’ve really had no shortage of buy-side interest in spot, whether prices are going up or down lately.

Futures outlook: We look for Class III & Cheese to open mixed; Dry Whey futures to open slightly higher.

 

NFDM prices fell and butter prices rose again yesterday.  Aggressive selling during the NFDM spot resulted in a fresh low of 70.50¢/lb., as pressure to move product was dialed up. The inventory and slow sales dynamic is enhanced by a solid start to milk production in Oceania, which may be one factor for the new price pressure. There have been discussions of Mexico stepping back in on the buy side lately.

As if in some alternative universe, butter prices rallied yesterday.  August butter was limit-up, with the deferred contracts not far behind.

Class IV milk prices finished unchanged to 19¢ higher on light volume.  A good chunk of the volume we’re seeing on Class IV is the result of Class III/IV spreading lately.  Look for those spreads to stay wide for now.

Futures outlook: We look for Class IV, Butter & NFDM to open steady to lower.

 

Grain futures

Corn and soybeans prices struggled in choppy trading yesterday and were lower overnight, as yield-promoting weather continues, and export sales slack. The latest Drought Monitor shows the continued drought in California.

Futures outlook: We look for the grain complex to open lower across the board.

 

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