CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
Early Morning Update - February 27, 2024
By: Dairy Team - Chicago, Dairy Chicago
The eagerly anticipated, delayed and, ultimately, rather uneventful January Cold Storage report dropped at 2pm yesterday. The industry breathed a sigh of relief – not for the numbers themselves but for the fact that the report was released. The numbers – those didn’t seem to bother anyone and were right in line with our expectations. No surprises this month.
Cheese stocks were a little higher than forecast and up just 0.5% from last year. Stocks of American style cheese were lower than forecast, but up from last year. Stocks of Italian style were higher than forecast, but down slightly YoY. Cheese inventory at these levels would argue for a CME spot block price around $1.69 during January, instead the market was a little depressed at $1.52. Italian cheese stocks came in higher than expected, and we won't know for sure until we get the Dairy Products report for January, but our guess is production of hard Italian cheeses was strong for the month. Class III was $15.17, a nice and cheap level to build some inventory for longer-term ageing. Class III and Cheese futures didn’t flinch on the report.
Butter stocks were right at forecast for January, down 5.8% YoY. While the butter market is tight, the first quarter stocks/use ratio would argue for a price around $2.35 instead of the $2.85 the spot market is at today. Although the market has been running strong relative to the model during Q1 in the past two years, so maybe this is just normal now. Nearby butter futures weakened some on the news, but this morning quiet. Unrelated, NFDM futures are weak overnight likely on today’s weaker GDT Pulse result (see below).
Spot cheese firmed Monday helping to extend nearby Class III and Cheese futures gains. The block/barrel inversion continues with barrels 8 cents over blocks at the closing bell yesterday. The big, simple picture here is that we have a choppy block market – up 5, down 5 (give or take) – this month, while the price of barrel cheese posted a 3-month high yesterday. The last time we we’re trading at or around $1.67 was before Thanksgiving. Giving the moderate availability of fresh block and barrel cheese, we won’t be surprised if the spot market continues to chop around the low $1.60 price average this week, but there is a supportive nature to the market now.
This may be a good time to break and talk about weather. It’s going to be 70 degrees in Chicago at 2pm today. The Midwest is basking in the warmth and has been for some time. Restaurants are full, people are not sheltering from 10 degree normal weather. This weekend, I saw at least 40 people sitting outside a popular brewery taking in a springtime Sunday funday in Chicago. In February.
While the good weather might be short-lived going forward, we suspect regional restaurant demand has benefitted this month. We also suspect a warm, dry February can lead to host of issues especially for the grain markets. Maybe the grain trade got the memo yesterday as corn did an about-face rejecting contract lows and rallying 8 cents on heavy volume. That heavy volume is the thing to watch. Light volume rallies are typically viewed as selling opportunities. We shall see. For now, weather doesn’t seem to be impacting dairy. In fact, the expectation here is that more moderate weather will help spur better milk per cow. Again, we shall see.
Class III, Cheese futures volume yesterday was moderate to heavy but mainly mixed around current levels. As feed costs have come down, we’ve seen a modest uptick in producer selling interest recently – especially out in the second half – as prices are retesting their October 2023 high price print. Class IV milk was stable with butter futures pushing higher in that anxiety-ridden pre-report type trade. NFDM was weaker. Volumes for both we’re lackluster.
GDT Pulse prices were sharply lower with WMP down 2.6% from the Event last week while SMP was down 2.7%. While some of this weakness is probably driven by weaker demand the supply outlook for New Zealand has also been shifting higher with the weather turning out better than expected.
- Dairy
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CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
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