CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
Early Morning Update - October 17, 2023
By: Dairy Team - Chicago, Dairy Chicago
A lack of fresh dairy specific news and relatively stable spot market price action ahead of this morning’s GDT event led to a relatively quiet dairy complex traded Monday. Futures boards were more or less modestly lower across the board with the exception of NFDM, which finished the day steady/higher. Spot markets are relatively stable so far this week and that coupled with a lack of fresh dairy specific news – and position squaring ahead of this morning’s GDT auction event - ushered in the rather uneventful Monday trade.
SGX futures have been over estimating GDT results for the last few events. Currently, futures are pricing in a 4.2% increase for the GDT index. Given the fact that GDT prices have yet to reach futures prices leading up to the GDT event, we’d take the under on 4.2%. Weather conditions in New Zealand are far better than production levels might indicate. Currently the NZ pasture growth index is above last season’s levels and right in line with the 5- year average. Still, Fonterra is noting poor milk production on the North Island.
Class III and Cheese futures continue to chop sideways in what has been a remarkably stable trading situation for mid-October. Domestic cheese demand is good but well supplied, which has resulted in a mid to high-$1.60 cheese price average market clearing price for weeks now. 2024 contracts – particularly first half of 2024 – are up about 20 cents (2 cent per lb. on cheese) in the last few days as budget-setting bids are starting to flow. Producer activity is still limited but given the $18.50 first half price average, we’ve seen a slight uptick in producers who are beginning to put on small coverage. When the closing bell rang, Class III trading fell short of 1,000 contracts while 339 cheese contracts changed hands. The futures market is content to trade current levels until there is a disturbance to the status quo.
Big moves tend to reverse quickly. That is not the case so far for butter. Spot butter fell a penny yesterday but traded three times. Futures market selling continued to be a hallmark of the trade as 2024 is trading on its own accord. In fact, the 2024 calendar strip has fallen about 4 cent in the past few trading sessions to close at $248.900 yesterday. This level – the $250.000 – level ought to hold with both interested end user buy side interest meeting what has developed as a continual stream of sell side paper.
NFDM continued its climb Monday as the market has been well-supported for weeks now. This is not a runaway bull market – it’s a market fraught with rather light offers out along the forward curve, which has been the case now for some time. The 2024 calendar strip finished at $135.150 yesterday. We’re not sure if that is far enough at this point, but we do expect some corrective trading activity (a down day or two) in the near-term. Perhaps today will be that day. Ultimately, however, the trade will need a dose of bearish information to stay lower and that type of information for NFDM seems in short-supply today.
The USDA will be releasing the September Milk Production report on Thursday and our forecast is total U.S. production will be flat against last year, which is an improvement from the preliminary -0.2% reported for August. Given how weak the August cheese, butter, powder, etc. production was, we think there is a strong chance that the August production data gets revised lower with the adjustment likely coming from a smaller dairy herd for the month. However, dairy cow slaughter has slowed dramatically in September and early October, so even if we get a downward revision for the August herd size, we will probably flatten out in September and October. The big thing to watch is whether we get a continued improvement in milk production per cow because that will likely be the bigger driver behind growth in Q4 and early 2024.
- Dairy
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CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
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