Morning Dairy Comments, 02/09/2016

Tuesday, February 9, 2016

General Market News

· The ‘flight for safety’ held throughout most of Monday’s session with gold closing up nearly 3% on the day

· Dow futures finish well off their lows but still down triple digits and at a two year low     

· USD trades higher early on but settles lower, back below the 200 day MA

· New Hampshire primary today

· Nikkei down 5% overnight setting US equities on path to open triple digits lower again today



Class III and Cheese

Suffice to say the class III, cheese and whey markets were a bit slow on Monday. Perhaps it was a Super Bowl hangover? Whatever the case prices were under a mild amount of pressure as on light volume settlements for class III ranged from 1 to 9 lower as total volume slightly exceeded 500 contracts. Technically the slow sell off did push nearby months back below some of their short term MA’s and may lead to additional sell side pressure if the spot market remains mute as it did yesterday. Cheese futures were also mostly lower on the day as the Feb through August contracts were -0.002 to -0.006 with decent volume activity from March through August. The USD had a volatile day trading higher early then slipping late in the session. The Dow falling triple digits seemed to have a negative influence on the commodity sector at large and while price movements were relatively minimal on class III perhaps there was some spill-over weakness gleaned from the other markets.

Dry whey futures were mixed but mostly lower on the day with settlements ranging from +0.100 to -0.500.

CWT announced assistance with 4.2 million pounds of cheese and WMP export sales to be shipped between February and July.

We look for Class III, cheese and whey to open lower

Spot Session Results
































DOWN 1 ½




Class IV, Nonfat, and Butter Futures

Early exuberance in the butter market gave way to slippage and a reversal into the red as sellers were emboldened by a lower spot call and swept the legs out from under the futures with pressure seen on out through August on moderate volume. The trade has been steadily building in premium with spot showing a reluctance to pull back and test the $2.00 mark, however the trade has turned volatile of late with the AA grade requirement passing into the history books. This has brought the expectation of more loads being brought to Chicago and at times this has been the case, but there has yet to be any real consistency on this front.

As we drill down a bit more here, notice the action in the March futures contract as it has stair stepped lower on recent price breaks (circled on chart), logging lower highs and with a downdraft today, would log yet another lower low for the move. With spot now sitting at $2.1550, additional pressure may warrant such a move to test the $2.00 mark, which would likely open the floodgates to sharp downdrafts in the futures with the 50 day moving average likely in the cross hairs (red line on the chart below). From a technical perspective, yesterday’s trade increased the likelihood of additional pressure being brought to bear as the 10 day moving average (yellow line) looks to eclipse the 20 day moving average (blue line), which is a bearish development.

March Butter~Daily


Sellers once again drilled down on the NFDM market as a stalled spot call emboldened the bears and took values into the red through the bulk of 2016, albeit on light volume. The trade continues to languish as range bound price action has led to the selling of rallies and buying of dips, as evidenced on the chart below. The latest recovery attempt was convincingly blunted at the 20 day moving average (blue line) with a full retracement now a distinct possibility.

July NFDM~Daily:


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



Grains could not escape the broader market selloff on Monday and ahead of a USDA report it was a bit surprising to see relatively sizeable price movements. Wheat led the declines falling by 8.25 cents to $4.5850, corn was down 3.50 cents to $3.6225 and soybeans were down 5 cents to $8.6250. The charts are starting to look fairly bearish once again across the board. While today’s report is usually not a big price mover if it is bearish in nature as most expect we may move down to test the lower end of the recent price ranges. With a potential strong la nina influence this summer we will be looking to buy upside price protection for the grains if we do see a re-test of those lows. Report estimates included below.

We expect grains to open mixed -2 to +1 this morning.



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.

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