CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
Early Morning Update - May 29, 2024
By: Dairy Team - Chicago, Dairy Chicago
Butter futures took the limelight to kick off the shortened holiday week closing limit down (down 7.5 cents each month) from June to December 2024. This is what yelling “fire” in a crowded theater looks like. We’ve long said the demand we saw for US butter was really demand for US butter futures. No other time in history has the spot butter market been over $3.00/lb. WITH a futures market carry.
Why does this matter?
Likely several reasons, but mainly in high-priced bull markets the supply/demand problem is ordinarily felt most acutely in the cash market. The idea is that if demand for the actual product is overwhelming supply, the spot market will sort it out by launching the price above all other prices (the futures forward curve in this case) and incentivizing all available butter to come to market immediately. Or to look at it another way – inverted markets disincentivize the “putting up” of new inventory (see chart below courtesy of StoneX Plus).
The Cold Storage report may have helped kick off the weakness yesterday, but butter has been in an odd bull market one with plenty of bullish news to go along with for most of the last few months. Upside risks still exist to be sure as we sort out what milk production does over the next 6 months, but yesterday’s butter trade may have been a big fat signal that the futures buy side belly is getting full, the market is overdue for some sort of corrective move, and the sentiment of markets can change on a dime. That said, we won’t rule out a bump to prices as air pockets – on both sides of the market - get created by big moves like yesterday, but our view presently is that any strength off the lows today will be viewed as a selling opportunity.
All other markets in the dairy complex were also weaker yesterday. After consolidating late last week around some technical areas of support, Class III and Cheese sold off again yesterday as the market continues to correct. Volumes were moderate and spot cheese was basically stable around current levels (blocks dropped 0.75 but still above its low last week). The expectation is that more spot downside is likely with the surprise at this point being an uptick in spot cheese prices. We don’t know which way the spot winds will blow today, but we do expect a good two-sided trade for futures in both positive and negative territory. Not necessarily in that order.
NFDM futures were mostly lower yesterday too as the spot price fell 0.50 to close at $117.000. Of all the dairy markets, NFDM has had the most bearish sentiment over the last month. Even market bulls, few though they are, are lackluster in their views of market strength. There is some talk of a slight increase in demand from our friends to the south, but overall global demand remains subdued. Our view is that there will be more buying at $1.25 than at $1.17 as any new demand – should it develop – would likely reveal some FOMO not unlike what the Cheese market did back in April. We’re not there this morning necessarily, but we thought it worth mentioning.
Grains were weaker yesterday ahead of the crop progress report, which showed a surge in planted acres, up to 83% for corn and 68% for soybeans. While there were scattered storms throughout the US last week, many states had good conditions to plant. This week’s report brought us ahead the 5-year average schedule.
The harsh storms and severe weather patterns we’ve seen this year is brought on by the changing seasons combined with a stronger-than-normal jet stream above the northern hemisphere, bringing not only tornados and severe thunderstorms, but also significant rainfall in the corn-belt. As El-Nino begins to fade, the question of if (and if so, when) La-Nina will develop becomes the focus.
The National Weather Service says an ENSO-neutral status is probable this month, and that La-Nina has a 49% chance to develop in June-Aug. and a 69% chance to develop in July-Sept. La-Nina typically means hotter and dryer temperatures for the US summer, so it is a crucial development to watch for in the coming month.
- Dairy
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CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
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