CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
Early Morning Update - March 21, 2024
By: Dairy Team - Chicago, Dairy Chicago
Class III and Cheese finished mostly lower Wednesday as the spot barrel market lost a half penny. Blocks remained unchanged. Both remain lackluster given the recent demand for Class III and Cheese futures contracts, which remain in a lofty carry structure vs. spot. Class III and Cheese showed modest signs of weakness following the 2pm release of February’s Milk Production report yesterday afternoon. Overnight, however, buyers picked away at nearby Class III offers – as well as 1H 2025 offers – with prices still firm this morning.
Headline U.S. milk production in February was down 1.3% after adjusting for leap year, which was weaker than the -0.9% forecast. The USDA revised down the size of the herd for January, but they estimate that the herd expanded by 10,000 head between January and February which is seasonally normal. The bigger surprise is milk production per cow which was down 0.4% compared to our forecast of flat against last year.
U.S. farmers seem focused on boosting milk solids per cow instead of boosting milk per cow—and they’ve done a good job, but now we have a disease spreading in the South Central U.S. that further reduces milk per cow. . We’ve been forecasting an expansion in the herd for Q1 so that part isn’t a surprise to us and doesn’t change the medium-term thinking, but forecasted production per cow is going to shift lower given how weak we’ve recent been running which is going to reduce our U.S. headline milk production forecast for coming months.
Despite the “bullish vs. expected” call on this report, the market may be a little confused by the expanding herd in February (which is seasonally normal), but the weak milk production per cow. And this says nothing of the weaker demand (with exception of Butter) that has weighed on dairy so far in Q1. On the other hand, with the cattle illness in Texas still carrying plenty of uncertainty, Class III and Cheese markets may remain rather well-supported regardless of the Feb Milk Production report.
Spot butter rose 1.75 cents, once again looking to test the $2.85 level which has been a key resistance over the last month. Weaker than expected milk production and now flat component adjusted production likely underpinned the market but it’s been mostly demand keeping us at these levels. Q2 futures failed too take out the highs in late Feb and ended up settling a few cents lower so we’ll see today if we can take out those higher today or if the $2.88 level will develop into resistance. Futures volume recovered will with 370 contracts trading as open interest rising 215, a signal of strong new buying as prices pushed higher yesterday.
Spot nonfat fell 3/4ths of a cent yesterday to 111.750 and is down 4.5 cents in the last 3 sessions as weak Mexico demand continues to loom the market and the market continues to feel the pressure of a weaker GDT. Futures volume traded 367 as open interest rose by 101 contracts. Testing the spot lows in September @ 1.05 is not out of the question in the short term but we’ll likely need to see continued evidence of weak demand and stable to growing milk production globally to justify it.
- Dairy
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CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
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