Morning Dairy Comments, 02/10/2016

Wednesday, February 10, 2016


General Market News

· Trump and Sanders win NH primaries

· Yellen testifies in front of House Financial Services committee today; Senate Banking Committee on Thursday.       

· Coca-Cola reports better than expected quarterly profits 38 ¢ eps vs 37¢ expectation

· Mexico’s ex-president says his country won’t pay for Donald Trump’s ‘stupid wall’

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Class III, Cheese & Dry Whey

Prices were softer on rather anemic volume.  The 2nd half finished down 6 cents to an average of 15.52.  February – June finished slightly higher on the day closing up 3 cents to 14.08. 

Fundamentally we continue to work through a market that is out of balance.  USDEC’s recent report shows total dairy exports fell 26% in 2015.  Cheese exports were down 14%.  Whey proteins were down 12%. US and EU production continues to grow even as exports have plummeted. 

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World dairy supply is also expected to continue to weigh on price.  European dairy industry continues to push product into intervention and the 109,000 ton limit for the program is expected to be reached by March.  The US continues to build stocks.  Commercial stocks of butter, non-fat and cheese were 115,000 tons more than seasonally normal at the end of November and the December cold storage report showed cheese in storage increasing 12.6% YoY. 

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The pie chart above breaks out the statistical breakdown of Class III settlements since 2000.  52% of the time prices fell below 14.90, 25% of the time fell between 17.99 and 14.91.  Only 20% of the time have we seen prices above 18.20. 

The 11 month average for 2016 closed yesterday at 14.87.  Many producer customers are focusing efforts in the 2nd half which closed yesterday at 15.52.

We look for Class III, cheese and whey to open slightly weaker

Spot Session Results

Type

Trades

Settlement

Change

Bid

Offer

CHEESE

BLOCKS

0

$1.4700

UNCH

1

0

 

BARRELS

0

$1.4650

UNCH

0

0

NFDM

GRADE A

1

$0.7300

DOWN 2

0

1

BUTTER

GRADE AA

0

$2.1350

DOWN 2

0

2

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Class IV, Nonfat, and Butter Futures

Class IV components again ruled the roost yesterday with butter finishing 1 ½ to 3 ¾ cents lower as spot dropped again.  Non-fat finished mixed.  Class IV finished lower with the 11 month pack dropping 11 cents on average with most of the weakness centered on the 2nd and 3rd quarters.  

The one bright spot in exports has been seen in US milk powders.  For December we saw NDM/SMP exports increase 36% YoY in December.  This brought 2015 growth up 3%.  Mexico accounted for 60% of that export growth.  Butterfat exports continue to see declines falling 51% YoY in December and 70% for the January – December time period.

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We look for the class IV markets to open steady to lower

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Grains

Grains waited all morning for the release of the WASDE report to essentially ignore it once released.  The report only showed minor adjustments to the supply /demand sheet.  Corn imports were increased by 10 mln bushels, Ethanol usage of corn was increased 25 mln bushels.  Corn exports were decreased by 50 mln bushels.  Trade believes the USDA still needs to reduce by another 50 mln bushel.  

Soybeans ignored the WASDE report and finished slightly higher.  Crush was reduced by 10 mln bushels on expectations of lower meal demand.  Bean oil was consequently adjusted.  Production was reduced by 80 mln lbs but imports were increased another 35 mln lbs dropping the US carryout by 45 mln lbs. 

We expect grains to open mixed with corn and wheat slightly lower, soybeans slightly higher

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