Morning Dairy Comments, 11/17/2015

Tuesday, November 17, 2015


General Market News

· FDA seeking ‘natural’ food label comments http://goo.gl/vaFy2M

· China mulls single ‘super-regulator’ after market crash http://goo.gl/4nnoXe

· Wal-Mart shares surge after 3rd quarter profits beat expectations

· MPP enrollment deadline Nov. 20th

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Class III, Cheese, and Whey

The Class III and cheese markets were dragged lower yesterday as the Block/Barrel spread increased to 18 cents after the 2.75 cent decline in the Barrels.  The Class III futures settled between 24 cents lower and 3 higher as over 900 contracts changed hands.  Nearly half the total trading activity occurred within the December and January contracts as market participants concentrated their efforts to those contracts most susceptible to spot price volatility.  The onus will now be on the buy side participants to buoy prices at current levels as the general consensus relating to the Block/Barrel spread seems to be that a decline in the Blocks to close the spread is far more likely than a rebound in Barrel cheese prices.

The cheese futures settled between unchanged and 3.50 cents lower in sympathy with the Class III market.  The majority of trading activity again occurred in the nearby contracts most sensitive to spot price volatility, though trading volume reached as far out as the February 2017 contract. 

We look for class III, cheese and whey to open lower

Class IV, Nonfat, and Butter Futures

The Class IV market closed out Monday’s trading session with mixed results as the November contract gained 19 cents while the remaining contracts through December 2016 settled unchanged to 9 cents lower.  The component markets provided divergent price action as the NFDM futures continued their slide lower while the butter market remains well supported. 

Butter futures settled mostly between unchanged and 1.500 cents higher with the December 2015 contract acting as an outlier with a limit 5 cent increase.  The spot butter session was quiet yet again, yet this current string of inactivity during spot hasn’t weakened the market’s resolve.  Demand for butter and fat in general remains strong as highlighted by the continuing trend of stronger year over year sales of whole milk while the sales of reduced fat milks fall.  In the month of September the sales of organic and flavored conventional whole milk both increased by 11.3% year over year while sales of conventional whole milk had increased by 4.6%.      

NFDM futures were driven between 0.225 and 2.750 cents lower as the spot price moved to its lowest level since August 31st.  Expectations for another bearish showing in today’s GDT auction have added to the market’s sentiment that global demand remains lacking in the face of over abundant supplies.

We expect NFDM to be lower, butter steady

Spot Session Results

Type

Trades

Settlement

Change

Bid

Offer

CHEESE

BLOCKS

0

$1.6200

UNCH

1

0

 

BARRELS

2

$1.4400

DOWN 2 ¾

1

1

NFDM

GRADE A

4

$0.7900

DOWN 1

0

0

BUTTER

GRADE AA

0

$2.8850

UNCH

0

0

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Grains

Grain markets ended Monday’s trading session with mixed results as the corn and soybean markets inched higher while the wheat market slipped moderately lower.  The December corn contract settled 1.75 cents higher while the March contract added 1.25 cents as funds were estimated to have bought 4,000 contracts.  Producer selling remains near nonexistent at current price levels, yet the outlook of a burdensome crop coupled with a lack of export demand will cap any further potential price increases.  The soybean market posted a modest rally in the second half of the trading session leading to the January contract settling 4.25 cents higher while the March contract gained 4.50 cents.  The NOPA figure released yesterday revealed October’s crush at a record 158.9 million bushels, 2.1 million below the average trade estimate, but enough to lead to funds buying a net 3,000 contracts.  The wheat market pushed marginally lower as the December contract settled 1.75 cents lower while the March contracts slipped 2.25 cents.  As with the corn and soybean markets, producer selling remains absent yet the strong Dollar continues to inhibit export demand.   


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