Morning Dairy Comments, 11/10/2016

Thursday, November 10, 2016


General Market News

· Donald Trump and Barack Obama to meet at White house

· Thousands take to streets in majors cities to protest Trump election

· U.S. dairy traceability hits 80% goal https://goo.gl/YEBok2

· Global food prices on a sugar and dairy high https://goo.gl/FdDJVW

· Volatility Hits Commodity Prices https://goo.gl/QAtFdl

clip_image001

clip_image003

Class III, Cheese & Whey

While other markets whipsawed on election news, dairy remained calm.  Class III and Cheese values through the first half of 2017 were weaker, albeit slightly.

The question now is what does this election mean for dairy?  Regardless of what side of the aisle one is on, the question is likely to be front and center as we transition from one administration to the next. 

Mexico has been of particular interest to the candidate.  From immigration reform, to the proposed 35% blanket tariff on all Mexican goods, Mexico will likely be on the radar in regards to policy change.  Whether or not a change occurs is yet to be seen, however, we should be aware that Mexico is a huge consumer of U.S. dairy products.  Just how big of a consumer you may ask?  Well, one of our largest with YTD export totals of NDM/SMP 210,591(mt), WMP 3,495(mt), Cheese 65,349(mt), and Butterfat 16,547 (mt).   As a huge source of labor, as well as a large consumer of U.S. product, Mexico is an important player for U.S. dairy.  Should the new administration move to isolate U.S. markets, NAFTA could all but disappear resulting in increased cost of labor and goods. 

On the other hand, should we be reading into the President-elect’s willingness to work with Russia? What will that mean for dairy? Do we want it to mean anything? There are many unknowns going forward - from NAFTA and TPP, to the Russian dairy ban and inflation concerns. For now, however, futures are wrestling with disbelief in the spot market strength.
Yesterday’s weaker barrel market sheds some light on willingness to sell. The sell side seems to be gathering a little more steam here lately. We’re not looking for an all-out collapse, but futures will likely be choppy as spot prices teeter towards a correction. 

We look for Class III, Cheese and Dry Whey to open steady-higher.  

 

clip_image005

Class IV, NFDM & Butter

Butter values strengthened yesterday with butter settling anywhere from unchanged to +1.25.  With little fresh fundamental news, butter futures are trading sideways now. Despite, the move higher in butter NFDM managed to trade lower through January 2018. NFDM futures volume was impressive, eclipsing that of butter by a healthy margin. 

NDPSR for the week ending November 5th reflect an average price of $1.87 per pound for butter, an increase of 5.00 cents from the previous week. NFDM averaged 91.1 cents, a decrease of 0.1 cents from the previous week.  Block cheese averaged $1.64 per pound, an increase of 3.7 cents, while barrels averaged $1.60, an increase of 2.4 cents.

We look for Butter, NFDM and Class IV to open mixed.

Grains

Fresh supply data from the USDA prompted a sharp sell-off in the grain complex yesterday. In fact, the USDA estimates came in as FCStone expected. We’ve have had one of our best years ever in projecting the US corn and soybean crops.  Below is this year’s record.  Thanks to all who participated and especially to those who gave the extra effort to get the numbers in early in November.

clip_image007

The price weakness of yesterday didn’t last long, however, as prices rebounded overnight on soybean and soybean oil strength.

Brazil's Trade Ministry reported 1.9 MMT of corn imports so far in calendar 2016, up over six times from Jan-Oct last year; October imports alone came in at 495k tonnes, up almost 1000% from the same month last year.

The U.N. FAO world food price index rose 0.7% in October, to 172.6 points, now up 9% year-over-year after a steady rise since the start of calendar 2016.

We look for the grain complex to open higher across the board.

clip_image009

clip_image011


Unless otherwise noted, the posts on this blog should be construed as market commentary, merely observing economic, political and/or market conditions, and not intended to refer to any particular trading strategy, promotional element or quality of service provided by INTL FCStone Inc. or its subsidiaries. INTL FCStone Inc. is not responsible for any trading decisions taken by persons viewing this material. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by INTL FCStone Inc. or its subsidiaries. Reproduction without authorization is prohibited. All rights reserved.

Market Intelligence Free Trial