Morning Dairy Comments, 02/25/2016

Thursday, February 25, 2016

General Market News

· NYC restaurants can now be fined for not posting salt warnings

· Unilever names Bayer CEO Dekkers to succeed Treschow as Chairman

· Feds investigate Idaho organic alfalfa seed farmer

· Trump starts talking about running mates after Nevada win.

· IMF calls for urgent response to boost global economic growth



Class III, Cheese & Dry Whey

The markets were painted red again yesterday on strong volume as the board continues to react to a world market that has too much supply and a weaker spot market.  Prices weakness begets more weakness this week as Class III trimmed another 15-20 cents off with the 2nd half settling down 20 to 14.89 on heavy volume. The second half cheese average fell 2.07 to finish just under 1.6223/lb. Option activity continues to be very strong as over 3,300 class III and 1,000 cheese options traded yesterday. 
There is milk out there and there is cheese. With little in the way of “bullish” news, a weaker spot market, no immediate weather event and Cold Storage confirming significant inventories, the futures market is eradicating forward curve premium this week. Spring flush is just around the corner, which may exasperate the issue.  In the meantime, class III and cheese futures have been down for three days in a row.  Normally we’d call for a little consolidation on the 4th day (today) and see more of mixed trade.  We think that’s how today will start.  But if spot cheese falters again, there is little in the way stopping more erosion of futures at current.
NDPSR was released yesterday afternoon and it showed 13,000,384 lbs. of 40 lb. blocks were sold last week at an average of 1.49 which was .2 cents lower than the week prior.  9,466,774 lbs. of 500 lb. barrels (adjusted to 38% moisture) averaged 1.51 or ½ cent higher for the week.   Dry whey prices finished .9 cents higher to 24.6 cents on 8,628,740 lbs.

We look for Class III and cheese to open mixed

Spot Session Results


















DOWN 3 ¼







UP ¼







DOWN 8 ½




Butter and Non-Fat Futures

Spot butter dropped 8 ½ cents yesterday pushing futures limit down and triggering expanded 10 ¢ limits today.  Technically if we close below support at 2.06 we will have confirmed a head and shoulders which could accelerate the move lower.  The 100 day moving average will offer support but given the bearish momentum may not be able to hold.  Spot will continue to dictate day to day movement. 

Nonfat, the silver lining in spot yesterday finished ¼ cent higher but was unable to keep futures in the green in the face of limit down butter.  The market finished lower in the nearby contracts while the second half pack inched 0.050 cents higher to close at 91.329.  NDPSR showed butter decreased 1.9 cents to 2.1329 on 5,210,395 lbs.  Nonfat increased .9 cents to average 77.2 cents on 15,810,920 lbs.

April Butter Futures~Daily


We look for the butter to open lower and nonfat to be steady to slightly lower.         



We continue to follow the path of least resistance finishing lower in wheat, corn and soybeans.  Funds continue to add to short positions in wheat with trade estimating they have increased their short position by about 28,000.  Corn continues to slide as many are looking to the USDA Ag Outlook Forum (discussed in yesterday’s EMU) and anticipated increase in corn acres and subsequently larger carryout.  Soybeans continued their slide from Tuesday but have been range bound since January.

The grain markets are going to continue to struggle as farmers need to market crops to free up capital to prepare for this year’s planting.  We expect corn and soybeans to find resistance near recent highs but don’t expect any major moves higher or lower until we see what the USDA has to say in March.  We get the next crop production report on March 9th and then the 1st monster report of the year, prospective planting, March 31st.

July Soybean Futures~Daily


July Corn Futures~Daily


We expect grain markets to open higher.

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