Note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
May 21 spot session results:
Block cheese: $1.6450 (up 1.0¢)
Barrel cheese: $1.6175 (up 0.25¢)
Grade A NFDM: 91.50¢ (up 0.5¢)
Butter: $1.9300 (unchanged)
USDA’s Cold Storage report for April is scheduled for release this afternoon. We’re looking for cheese stocks to be above last year’s level. Stocks of American and total cheese will likely be higher versus their five-year averages. Butter stocks are expected to bounce back above the previous year’s level to just over 200 million lbs.
Although Class III and Cheese futures finished modestly higher Thursday, strong Upper Midwest milk production and weaker global prices continued to weigh on the minds of traders. Beneath the veneer, markets seem to be only reluctantly moving higher.
Trading volumes are light, and the daily volatility we’ve become accustomed to calmed over the past several days. Block cheese sellers continue to bring cheese to Chicago. The spot market seems in relative balance, the futures curve is carrying a premium, and commercial buy-side hedgers – although present – are not showing signs of worry.
Futures outlook: We look for Class III and Cheese to open modestly higher; dry whey is called steady.
Butter futures pushed higher yesterday after sellers went dark during the spot call. While we think Thursday’s bounce may be a bit overzealous, we do expect futures to stick near the $2.00 level for the time-being – unless we see an unexpected and significant stock build in Cold Storage data.
Futures outlook: We look for mixed opening on NFDM, Butter and Class IV.
Grain futures
Strong export sales and a stunted rally in the U.S. dollar sponsored a nickel bounce on the price of corn Thursday. Soybeans finished slightly lower, as South American harvest pressures and some speculation of increased acres in the U.S. continue to weigh on the market.
Six- to10-day weather maps are calling for more rain for all U.S. growing areas. The ground is wet and in some areas localized flooding is a concern. On the flip side, recent weather has made a nice dent in burgeoning drought conditions in the U.S., particularly from Texas to Oklahoma. California, Nevada and Oregon are seeing little to no relief.
Futures outlook: We look for corn, soybeans and wheat to open modestly higher.
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