Wednesday offered a Class III correction in nearby months. Each day it seems the bearish fundamental outlook gets reaffirmed in the conversations we have, but the bullish technicals do, as well.
The cheese market traded to a mixed close, with most of the losses in the nearby months, and gains seen in the 2015 contracts.
The NFDM market traded and settled lower yesterday, likely on the heels of California weekly average pricing, which declined and moving toward the low seen on May 23. We continue to hear conflicting reports about inventories, with some co-ops reportedly building inventories rapidly, while other seem to have little spot availability. We would think with butter prices being as high as they are, milk would be making its way to the dryers and inventory would be building.
The spot butter market continued to rise on Wednesday, pushing a nickel higher and pulling futures out of their early hole. While we’ve heard more than one source say butter could move to $2.40, $2.50 and potentially even beyond, not many of those were calling for the market to go so far so fast. We’re back to a situation where the spot market is carrying a 5¢ to 10¢ premium to nearby futures months, as the market is once again nervous to keep pace. If this run up continues, demand destruction can’t be far off. If that happens, the bottom could fall out for a period of time.
June 25 spot session results:
Block cheese: $2.0250 (unchanged)
Barrel cheese: $2.0425 (up 1.0¢)
Grade A NFDM: $1.8250 (unchanged)
Butter: $2.3500 (up 5.0¢)
Today’s expectations:
• Class III, Cheese & Dry Whey to open steady to mixed
• NFDM & Class IV to open mixed
• Butter to open steady
Grain futures
It was a slow day in the grain markets as everything closed within 5¢ of unchanged. Export sales are due out later this morning, but following that all eyes will turn towards next Monday’s USDA Grain Stocks and Acreage reports. Current trade estimates see a wide range in corn stocks.
Source: Dairy Herd