Morning Dairy Comments, 12/28/2015

Monday, December 28, 2015


General Market News

  • U.S. battered with winter storms http://goo.gl/DRzYiV
  • Milk prices: glimmer of hope for dairy farmers in 2016 http://goo.gl/CXDZJa
  • Crude Oil down to start the week
  • China’s Shanghai Composite slides 2.6%
  • Amazon signs up 3 million for Prime in one week

 


Class III, Cheese, and Whey

The class III and cheese futures downtrend was offered a bit of a reprieve last Thursday. A modest corrective bounce to the upside temporarily stemmed the bearish forces that have been intact for some time. Although selling pressure of late has pummeled prices to contract lows, a corrective bounce should really be no surprise to any of us. Markets rarely move in one, sustained direction for weeks on end without some sort of eventual corrective adjustment. And the nearby contracts are really due for more of what began on Christmas Eve.

February Weekly Class III Chart

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Spot prices that have threatened time and time again to breach the $1.40 mark but have found continued support. That support, at times, has felt defensive in nature. Defensive support is not usually long-lasting support; those defended price levels generally get taken out. But for now it’s not out of the realm of possibility that a corrective bounce to the upside may ensue as a result of the price action we saw late last week. Look for a corrective pattern to prices this week. The outlier would be some type of sustained upside move.

Block cheese prices were down 3.50 cents on the week, to close at $1.4050/lb., in a market that saw 10 loads change hands. The block price is 9 cents below last year’s price. Barrel cheese ended the week 2 cents lower at $1.4300/lb., with 7 loads traded. The price is 1 cent above a year ago.

Cheese holdings in selected storage centers as of December 21 were up 0.98% from the previous week, at 92.3 million pounds and are 1.2% higher than year-earlier stocks.

Dairy Market News reports the cheddar cheese price for December 14 – 25 in Oceania at $1.4288/lb., unchanged from the previous period.

The midpoint Central dry whey mostly price was down 0.50 cents from the previous week, at 21.13 cents and 35.12 cents lower than the comparable period in 2014. The midpoint Western dry whey mostly price was 24 cents per pound, unchanged from the previous week. The price is 25 cents lower than the comparable period in 2014. For Central and West 34% whey protein concentrate, the midpoint of the mostly price was reported at 53 cents per pound, unchanged from the previous week.

Monthly slaughter numbers came in at 230.3 million head, 5.7% higher than year ago levels but 7.2% lower month over month.

We expect Class III and Cheese to open steady, slightly higher and Dry Whey to open mixed.

Spot Session Results

Type

Trades

Settlement

Change

Bid

Offer

CHEESE

BLOCKS

0

$1.4050

UP ½

1

0

 

BARRELS

2

$1.4300

UP 1

2

1

NFDM

GRADE A

0

$0.7600

UNCH

1

0

BUTTER

GRADE AA

10

$2.0375

DOWN ½  

1

1

 

Class IV, Nonfat, and Butter Futures

What can be said except it’s more of the same as we’ve seen as far as trend is concerned? Butter is and continues to be the real story here as its resiliency has impressed and likely will continue to do so as hedgers feeling the heat of back to back record pricing years have been sparked to engage in active hedging. Justifiably so, as concerns with the California drought and the dietary shifts has underpinned prices and likely raised the floor on this market. On the other hand, we expect NFDM to trade range bound until the current fundamentals are dislodged and a fresh dynamic takes shape. 

The butter price settled the week at $2.0375/lb., down 2.25 cents from last Friday. The price is 48.25 cents higher than in 2014. Butter holdings in selected storage centers, as reported by Dairy Market News on December 21, were down 0.6% from the previous week, at 6.6 million pounds but are 150.8% above 2014. Dairy Market News reports that the 82% butter price for December 14 – 25 in Western and Eastern Europe was $1.4118/lb., down 2.27 cents from the previous period. Oceania’s price was $1.4062/lb., up 6.81 cents from the previous period.

The Grade A NFDM price was down 0.50 cents at 76 cents per pound, with 1 trade this week. The Grade A price is 24 cents below last year’s price. Dairy Market News reports that the skim milk powder (SMP) price for December 14 – 25 in Western and Eastern Europe was $0.8221/lb., unchanged from the previous period. The price in Oceania was 85.62 cents, unchanged from the previous period. Dairy Market News reports the midpoint Western nonfat dry milk (NFDM) mostly price at 76.50 cents per pound, down 1 cent from the previous week. The price is 32 cents below 2014’s price.

For the week ending December 19th, the National Dairy Products Sales Report showed a sharply lower butter price of 2.46 on weaker sales volume of 2,996,042 million pounds. NFDM came in slightly lower at 0.79 on stronger sales volume of 20,311,023 million pounds.

NFDM, Butter and Class IV are all called to open mixed this morning.

NZX Futures

Market closed for Boxing Day. 

Grains

Grain markets continue in search of that elusive story to move on with conviction but nonetheless remains grasping vainly at thin air. Recent dryness in northern Brazil, which has stressed at least 30% of the bean crop, has seen some relief of late. 

Fund managers remain short the grains and were small sellers to wrap the week on Thursday with the question being will they opt to pressure prices to fresh lows for the move or will they lighten the load heading into quarter and year end? Either way, it appears that prices will continue to be largely range bound with a skew towards the bearish side of things as technical resistance looms overhead for corn and beans remain wedged between support and resistance. We’ll get a look at fresh CFTC data later on this afternoon.

We look for a mixed opening in the grain complex today.  Corn and Wheat are called slightly higher, Soybeans slightly lower.


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