Morning Dairy Comments, 12/30/2015

Wednesday, December 30, 2015

General Market News

· Heavy winter storms hit New Mexico:

· Many Wall Street forecasts call for 2016 to be worse than 2015 for equities

· Google, Amazon trade to all-time highs as the Dow posts near triple digit gain

· Crude oil down 2+% overnight


Class III, Cheese, and Whey

The Class III rally seems to have been short lived as futures gave back some of the gains made in the prior session.   Nearby Jan through June settled on the day as much as 13 lower.  Regardless, Q4 managed to hold onto gains, settling higher anywhere from 9 to 12 higher. Overall volume numbers have been less impressive week over week.  While we expected a quieter Christmas week, it seems that the market participants have stepped aside as we approach the New Year instead. With that said, milk continues to move into cheese as buyers look to build inventory after the holiday rush.   On the international front, production has been robust, especially in Europe. For now this trend is expected to continue. 

International prices released this morning show little movement with the exception of butter.   While up slightly in Oceania, European prices declined a bit. Overall, butter continues to trade at a discount to the U.S.

While the headline from the winter storms in New Mexico is a bit of a shocker generally speaking this types of local events do not ultimately have a significant impact on market pricing. It will be interesting however to continue to monitor this as certainly a few days of milk production were missed and there are likely to be some heavy cow losses though we have our doubts they will be as large as stated in the article.  

We expect Class III and Cheese to open mostly lower and Dry Whey to open mixed.

Spot Session Results


















UP 4



















Class IV, Nonfat, and Butter Futures

NFDM saw mostly red across the board yesterday.  While lower, the largest declines were seen in the deferred months.  Values declines nearly 1.5 cents from August through December while nearby months saw only slight declines.  Regardless, the nearby Q1 pack now averaged near .8830.  Although the steep decline seems to have subsided, NFDM remains fundamentally week.  This weakness will be with us for some time, it seems. Weekly CWAP price was down 1.20 cents to 77.44 cents on light holiday volume of 5.8 million pounds.

While NFDM was fairly active, butter remained stagnant.   Butter volume saw less than 100 contracts trade hands, dwarfed by comparison to NFDM.   Nearby Jan and Feb saw slight declines while the 2nd half remained steady.  Butter seems to be a “wait and see” game with participants seeing who will make the first move.  Although we expect some declines to come to market, nothing of significance has come to fruition.  With that said, the curve remains flat.

We expect NFDM to open steady to lower, butter steady to higher and class IV mixed.





Corn finished lower making new contract lows in 15/16 crop year contracts.  Funds pressed their already strong short position yesterday selling an estimated 5000 contracts bringing the net fund position to -91,818.  Fundamentally there isn’t any news to suggest a change in sentiment.

Soybeans finished 10 ¼ to 11 ¼ cents lower as river disruptions because of weather was discounted as SA weather over the weekend had Mato Grosso receive much needed moisture  The extended forecast has also become much wetter.  Inspections are still running 12% behind last year and 5% behind the pace needed to hit USDA estimates expect US news to stay on the back burner as everyone continues to watch South American weather.

Wheat followed the other grains lower as little to no news came over the wires.  Export inspections are running 13% behind last year and 9% below the pace needed to hit USDA estimates.

We look for the grains to open steady to slightly higher across the board.

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