CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
Early Morning Update - August 22, 2024
By: Dairy Team - Chicago, Dairy Chicago
US markets have absorbed a myriad of bullish global data points this week. Strong Chinese imports, NZ exports, and strong price action on this week’s GDT auction event. The changing tone of global data and recent price action hasn’t been the driver of US markets per se, but traders have taken note. Our issues domestically stem principally from tighter markets driven in large part by continued constrained milk production against improving demand this summer. We continue to see an atypical response to higher prices by dairy farmers. On farm margins are much improved now but the lack of response is a testament to tight heifer replacement story, higher cost of money, and producers simply starting their journey to dig out of debt from the last year and a half. This was the theme of the milk production report that released yesterday.
Total production was down 0.4% YoY, with June cow numbers revised lower by 15,000 and June milk production revised lower by 0.7 percent (-1.7% from -1.0%). It’s only more evidence that the dairy doesn’t have the ability to simply expand the herd to bring the supply shortage in balance.
Digging deeper into the milk production report, one thing to note is that the bird flu, although still heavily affecting Colorado, has appeared to move through the states that were first impacted. Texas, Idaho, and New Mexico have rebounded nicely.
The futures market didn’t react much to the report and its clear that such a number was widely expected by the futures market. In fact, the headline number probably arrived better than most expectations (many participants looking for down 1% headline milk production). Class III and Cheese futures saw good volume and increases in open interest yesterday, but remains tethered to spot market action. Although barrel cheese gained another 1.75 cents yesterday to close at a new 2024 high of $2.2825, block cheese actually closed lower for the first time since August 8. We hear there are more fresh blocks available in the country as well. While this doesn’t mean prices need to fall like a rock – that is not our expectation – pullbacks or corrections in bull markets are common.
Whey traded a penny higher in the spot auction to settle at 0.5675. With much of the whey stream being diverted to high-protein products and cheese production down, there’s a bit of a premium today suggesting overall tight supply against present demand.
Spot Butter is perhaps the most bearish bull market we’ve seen lately. Spot sellers seem to have a never-ending supply of bulk loads to sell during the spot call but it doesn’t seem to matter. Buyers continue to take down huge size. 16 spot loads changed hands yesterday as the price fell a penny – back to $3.16, which is just under the prior 2024 high price set back in June. So a burst of buy side energy – which made a fresh 2024 high price for spot butter – came and went quickly. And there is more butter for sale out there. We won’t argue with the tape, but we also won’t call the recent spot butter price action bullish.
What’s more interesting is the futures action: 380 butter futures traded yesterday and open interest rose 259 contracts along with most of the futures prices themselves. That type of action we would normally see as bullish – and it may be. But it also may be indicative of a final, exasperated effort to “get coverage” as futures prices re-test contract highs put in back in early June.
Nearby NFDM took a beat yesterday as prices retreated from the recent strength while 2025 contracts continued higher. Spot gained another quarter-penny but did so with 7 trades, which gave market participants pause. The bigger picture continues to be a change in direction for the cash NFDM price, having made a new 18+ month high yesterday. Moving 4 cents above an 18-month high doesn’t stir the blood of market participants too much having repeatedly seen price strength fail. While that is always a risk, we’d suggest that a bigger new trend on the powder market is now developing.
- Dairy
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CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
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