Thursday’s trading session seemed to be a microcosm of everything that’s been happening over the course of the past month for the class III market. The market opened quietly enough but following the spot market seeing both blocks and barrels close higher the market nose-dived trading 20 to 30 cents lower only to rebound sharply from the lows just before settlements and closing mixed. Below we’ve included an overlay chart of the April class III contract vs. the spot block market. The penny and a half jump in blocks over the past two sessions looks huge in comparison to what we’ve seen while the April futures have traded as low as$14.83 all the way up to $16.15. Settlements ranged from -12 to +2 but in late afternoon trading the April contract traded to as much as 16 cents higher than the settlement value.
Volume was strong with the intra-day price movement as over 1,300 contracts traded. It’s still difficult to have a feel for price direction in the short to medium term as we’re moving toward the lower end of the recent trading ranges as the spot block and barrel markets tick higher??? Class IV prices are softer however and may be looking to lead the class III market lower. Whey prices continue to be a drag on class III values as the NDPSR price announcement weighed on futures with settlements ranging from -1.00 to -2.10 cents from March through October. Weekly DMN prices continue to trend lower as well, table included below. Cheese futures were mixed but mostly lower as well yesterday settling from -1.50 to +1.50 cents.
Weekly dairy cow slaughter saw a significant drop this week coming in at 57,300 vs. 63,700 last week this was down 1.9% year over year and leaves YTD at 4.6% higher than 2014. Perhaps this was due to the President’s Day holiday? Or perhaps it was due to the sharp rebound on futures prices seen in late Jan and early Feb but we will be keeping a close eye out next week as a slowdown on slaughter would certainly be bearish for prices moving forward.
We look for Class III and Cheese to open mostly higher and Dry Whey weaker.
Spot Session Results
|
Type |
Trades |
Settlement |
Change |
Bid |
Offer |
|
|
CHEESE |
BLOCKS |
2 |
$1.5600 |
UP 1 |
0 |
1 |
|
|
BARRELS |
0 |
$1.4950 |
UP ¼ |
1 |
0 |
|
NFDM |
GRADE A |
6 |
$1.0500 |
DOWN 5 |
0 |
0 |
|
BUTTER |
GRADE AA |
0 |
$1.7500 |
UNCH |
0 |
1 |
Class IV, NFDM & Butter
NFDM futures continue to fall sharply with settlements ranging from -2.750 to -3.500 lower from March through September. The spot market traded down 5 cents to $1.05 the lowest level it has seen since February 3rd. The weakness in the spot session has turned the charts once again bearish looking. A retest of the lows now looks like a good possibility based upon the chart below.
Butter prices were mixed on Thursday as the spot market remains quiet. March was the lone month to finish in the red, -1.25 cents while other contracts were steady to +1.375. While the coming week may see some additional holiday demand enter the marketplace at this point futures carrying a premium to the spot market comes as a surprise to us. We’d be on the lookout for further downside today and perhaps early next week as well.
Class IV values were lower in sympathy with the falling NFDM prices, futures finished the session 20 to 41 lower from March through September on moderate volume of near 30 contracts.
NZX markets closed out the week with significant weakness on futures contracts. WMP prices moved $100 (-3.0%) to $550 (-15.9%) lower from March through October, SMP prices fell by $25(-0.9%) to $100(-3.4%) from June through October and AMF was down $100 (-2.3%) to $120 (-2.8%).
We look for Class IV, NFDM and butter to all open lower in line with weakness seen in overnight trading.
Source: FCStone
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