The dairy market showed some exciting moves on Monday, September 23, 2024, and we’ve got the scoop. So, let’s dive in and see how the numbers stack up.
To begin with, cash dairy prices dipped amidst limited trading on the floor.
- Dry whey held steady at $0.5875.
- Block cheese slipped by $0.0375, closing at $2.20, with one sale touching $2.21.
- Barrel cheese also remained untouched at $2.59.
- Butter wavered, dropping by $0.0325 to end at $2.94, with trades registered at $2.94 and $2.9425.
- Nonfat dry milk remained stable at $1.38, with a single sale at $1.3850.
Let’s quickly look at yesterday’s cash dairy prices on the Chicago Mercantile Exchange. Dry whey held steady at $0.5875, signaling no change in market momentum. For cheese, blocks dropped by $0.0375 to end at $2.20, with a single trade recorded at $2.21. Meanwhile, barrels remained unchanged at $2.59.
Butter also saw a dip, falling $0.0325 to close at $2.94, marked by two trades at $2.94 and $2.9425. Nonfat dry milk showed no price movement, staying flat at $1.38, with one sale executed at $1.3850. These figures highlight mixed performances across different dairy products, giving us insights into current market sentiments.
Regarding Q4 Class III and Cheese contracts, the tug-of-war between bulls and bears rages on. The market remains bullish, but it has entered a sideways consolidation phase. Some softening in spot prices primarily drives this. For instance, a single block load traded at $2.20 yesterday, while the barrel market offer hovered lower without any trades.
Market participants expect continued spot price weakness. However, it’s noteworthy that aggressive spot barrel offerings have yet to materialize. Sellers have had the liberty to offer barrel prices more assertively but have only managed a modest drop of 3.25 cents in the barrel price over the past two days. If this downward momentum doesn’t accelerate soon, we could see renewed strength in nearby Class III and Cheese futures prices. Keep a keen eye on these developments because they offer crucial indicators for future pricing trends.
Spot butter prices faced significant sell-side pressure to start the week, falling 3.25 cents on two trades. This decline pushed butter prices to a five-month low, and there’s more at play than just market fluctuations. Typically, you’d expect seasonal strength through September, but this year is different.
An external factor that’s hard to ignore is the bird flu outbreak in California. The USDA recently reported 18 more cases, pushing the 14-day total to 34. Given that California accounts for 30% of the total US butter production, any disruptions there can have ripple effects across the market.
The unexpected decline in butter prices amidst this scenario is noteworthy. Butter futures also saw a surge in volume, with 601 contracts traded yesterday, indicating renewed interest and perhaps a reaction to these unfolding events. Most of this activity focused on the nearby October and November contracts, hinting that market participants are bracing for more volatility in the short term.
So, how should you interpret these shifts? If the bird flu situation worsens or continues, it will likely support butter prices due to constrained supply. However, the correction we’re seeing might also be a prelude to market stabilization. Either way, keep an eye on the bird flu developments in California—they’re pivotal for future price movements in the butter market.
The nonfat dry milk market has also been in a consolidation phase. Have you noticed that spot prices have stuck within a narrow two-cent range for the past few weeks? That’s right; it’s been a bit like watching paint dry. However, don’t let the slow pace fool you. This consolidation often precedes a significant move.
Recently, futures volumes have jumped. Following weak volume last Friday, we saw 224 contracts traded yesterday, with open interest climbing by 65 contracts. What does this tell you? It indicates that despite the range-bound trading, this market still has solid underlying interest.
The overall sentiment remains cautiously bullish. Sellers pushing prices lower have encountered willing buyers, suggesting underlying solid demand. We don’t expect this trend to change much in the short term. So, if you’re trading or planning to trade nonfat dry milk, keep your eyes peeled for any shifts in buyer activity—it could be your early warning signal for the next big move.
Shifting gears to the broader agricultural market, let’s talk about corn and soybean export inspections and sales. Why does this matter to you? Corn and soybeans are crucial feed components for dairy cows. So, fluctuations in these markets can directly impact your bottom line.
Last week’s corn export inspections were a pleasant surprise, hitting 43.3 million bushels. This exceeded trade estimates ranging from 18.7 to 35.4 million bushels. Consequently, we’ve seen a rally. This uptick likely springs from both new buying and short covering. Corn prices have hovered in the $4.00-$4.15 range for two weeks, influenced by uncertainty around the US harvest and weather conditions in South America. Notably, dryness in northern and central Brazil is slowing the planting of their main corn crop.
Meanwhile, soybeans are making waves, too. A private export sale of 165,000 metric tons to “unknown” destinations has everyone buzzing. The trade usually guesses these types of sales are heading to China. China might be stockpiling with lower US prices and potential worries over South America’s crop.
So, how do these grains impact the dairy market? First off, higher feed costs mean higher production costs for you. If corn and soybean prices increase, expect your expenses to rise. Given the tight interplay between feed and milk production, any significant shifts here can affect milk prices and your overall profitability. Stay vigilant—major moves in the grain markets could signal the next shift in the dairy sector.
In summary, the dairy market is currently experiencing some notable shifts. The lower cash prices for blocks, barrels, and butter indicate a possible weakening trend, while consolidations in Class III and nonfat dry milk futures suggest uncertainty. Additionally, the influence of grain markets on dairy cannot be ignored—rising feed costs could lead to higher production expenses for dairy farmers.
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