CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
Early Morning Update - August 23, 2024
By: Dairy Team - Chicago, Dairy Chicago
As we mentioned yesterday, Class III and Cheese futures are tethered to spot market action and that was evident again yesterday. Spot barrels fell 6 cents yesterday with no trades, it’s first decline since August 5th. Blocks dropped 1.75 cents on a single trade. Futures were already trading slightly weaker into spot but that accelerated after. At one point September to November futures were limit down. Futures were able to recover slightly so we don’t have expanded limits today.
The spot move brought a wave of selling as Class III futures volume increased with 2,632 contracts trading and a increase of 612 contracts in open interest. Cheese saw it’s highest trading volume this week with 637 contracts trading and a 192 increase in open interest. The sell side pressure is continuing this morning as we have opened nearly 20 cents lower. Ultimately, while milk production may have been supportive, it just gives us a look at the big picture and it’s spot market action and short availability of cheese that prices futures market action. We’re in a period of correction but the big picture hasn’t changed.
The USDA will release the July Cold Storage report on today. We expect cheese stocks to be down 3.9% from last year, which would be a small improvement from -5.8% in June. The slight improvement in cheese stocks is mostly driven by an expected improvement in cheese production. Butter stocks are expected to be up 9.4% compared to the +6.8% in June. The improvement in butter stocks is a combination of continued butter production growth along with a little weakness on the demand side.
After making new highs on Monday spot butter has traded slightly lower for the last three sessions. After trading 16 loads on Wednesday, there was no bids yesterday as prices fell 1 penny to $3.15. The recent pressure on spot has likely brought some selling to nearby futures as 440 contracts traded while open interest rose by 284. Prices were down 2-3 cents in nearby contracts. Spot nonfat fell a ½ cent yesterday on 8 trades, it’s first move lower since August 9th. Futures volume fell slightly as prices were slightly higher. Nonfat options have seen great volume recently with 2,850 options trading in the last 3 days. Most of it has been in nearby months but all of it has mostly been new option interest. What does this mean? We’re not exactly sure but market participants are looking for protection.
Spot milk basis in the Upper Midwest increased to the largest average value of any week this year. On average loads went for more than $2.50 over Class III. Better weather on the horizon is supportive for the supply outlook, but yesterday’s milk production report shows that the dairy herd is just not there. Overall milk remains seasonally tight and processors are reporting that they do not to expect to see any increase in supply availability until at least labor day.
Dairy cow slaughter in the U.S. was once again below year-ago levels. During the week ending August 10th dairy cow slaughter was down nearly 19% from last year’s levels, bringing the 4-week rolling total to a nearly 16% deficit from last year. On a total head basis dairy cow slaughter was down roughly 11,000 head. The decline in total beef slaughter was down 2.55% from last year’s levels as slaughter fell down nearly 15,000 head. Dairy cows during the week ending August 10th accounted for over 70% of the decline in total beef slaughter.
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CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
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