CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
Early Morning Update - March 20, 2024
By: Dairy Team - Chicago, Dairy Chicago
Class III and Cheese futures caught a bid Tuesday in the absence of any fresh, reliable news on the dairy cattle disease in Texas. Last week was the knee-jerk reaction on this illness. This week, it appears, Class III and Cheese buyers are willing to step in an get some price coverage. Class III was strong across the board with volume over 2,300 contracts and open interest rising by 165 lots despite dry whey futures price weakness yesterday. If we look squarely at demand for cheese, it’s reportedly quiet. The concern now seems to be driven by the supply side – an expectation that eventually the news of tighter milk availability broadly, and this unknown illness specifically, will impact the availability of fresh cheese. Or certainly the availability of fresh milk. Either way, both markets appear well-supported here midweek and ahead of this afternoon’s Milk Production report.
After adjusting for the extra day in February, we expect U.S. headline milk production to be down 0.9% from last year. As-reported (with the extra day) it is forecast up 2.6% YoY for February. There is a strong seasonal tendency for the herd to expand in the first quarter, and with slaughter still running 8% or more below year ago, we expect the herd to expand between January and February, but it will still be down close to 1% YoY. Milk production per cow has been hovering around year-ago levels and February was probably similar. Farmers have been focused on boosting milk solids instead of boosting water production per cow. Combined fat+protein in the milk was up 1.4% from last year during February, so even if headline milk production is down 0.9%, component adjusted production would be up 0.4%.
Butter futures seemed to follow suit with futures prices firming on light volume (130 contracts, OI up 65) despite a steady spot call. And we hear continued reports of good butter offers in the country. The butter futures market is really rather sideways around current levels so we don’t look at yesterday’s strength as any more bullish than the same type of price decline would be bearish. The market needs to breakout out of the trading range to be directionally up or down. At this point, with Easter less than two weeks away, we expect more back and forth for the market today but ultimately we won’t be surprised with some seasonal weakness working it’s way into the futures forward curve in the next 30 days. But spot is comfortable for now.
Which one of the dairy markets doesn’t look like the others: NFDM. NFDM futures declined along with spot Tuesday as volume spiked to 468 contracts as did open interest, which was up 199 contracts. We imagine the focus here is on the lack of demand and a willingness to overlook any milk production issues. Historically, NFDM can be a canary in the coal mine on milk production issues, so new NFDM weakness during concerns over milk supply for Class III/Cheese markets is giving dairy market bulls some bit of pause. That said, a quick look at the spot NFDM market reveals a market building a massive sideways base (floor) with the low still back in September 2023.
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CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
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