CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
Early Morning Update - September 19, 2024
By: Dairy Team - Chicago, Dairy Chicago
The cutting cycle has officially started and out of the gate, Powell initiates it with a 50 basis point move lower. This comes after a historically long period of “higher for longer” rates spanning 14 months. The justification plainly stated in the first paragraph of the official FOMC statement: “Job gains have slowed, and the unemployment rate has moved up”. That 50 bp cuts are not to be expected as the base case going forward, and that the Fed is in no rush to get back to neutral because “the economy is basically fine”. Chairmen Powell’s path forward will be to cut in larger increments should we get weak job reports in between meetings. Without them, 25 bp cuts are to be expected. They won’t say “mission accomplished” on inflation – but their actions point to it. So, it’s all about employment going forward
Records are made to be broken - and that’s what happened in the spot barrel market yesterday. Spot barrel cheese punched out a new all time high yesterday at $2.6225, up 5.75 cents, as 8 loads traded. Block cheese – as if to provide some ballast to the bullish market – fell 3.25 cents on offers only. The block/barrel spread widened to a 37.75 cent inversion – 3/4s of a penny below the all-time widest inverted (barrel over block spread) at 38.5 cents set back in November 2019.
The Class III and Cheese favored following the block market action while wholesale ignoring the continued barrel market strength as 2024 (and early 2025) futures sold off Wednesday. These markets don’t make it easy on traders. With a cheese price average of around $2.43 putting the equivalent Class III closer to $25.00, futures are keeping a safe, discounted distance with a clear “prove it” mentality. We hear anecdotal comments around a slowdown in cheese demand in the country this week, but we’re not convinced some buyers still need physical and are biding their time, hoping on a break in prices.
Weakness on the Class III side may have been partially inspired by the butter selloff this week. Spot Butter has finally busted up its 4-5 week 10-cent trading range in the $3-teens falling to $3.0050 – the lowest price since the end of May. Butter futures collapsed too trading ~2-6 cents lower well into 2025 on growing volume and rising open interest (380 futures trades and OI increased by 170). A big number like $3.00 may arrest the decline with more of two-sided trade today, but the prospect of more butter price weakness now that price action has turned lower is expected.
NFDM also sold off yesterday. Spot NFDM fell a penny to close at $138.250. The $1.40 level held and now the market is in a corrective trade we mentioned earlier this week. Improved demand has underpinned this move and there is likely more of that to come in our view, but we do expect lower NFDM price action in the short-term.
There was an FMMO conference in Madison yesterday. About 50 people in attendance. The vote should happen in February, implementation likely in April, except the adjustments to the solids in the milk that likely gets delayed a year. The feeling is all of the proposed changes will be in the final recommendations, the USDA isn't likely to change much if anything.
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CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
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