CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
Early Morning Update - February 21, 2024
By: Dairy Team - Chicago, Dairy Chicago
The GDT auction finished up 0.5% for all products with WMP and cheddar the standout weaker products. North Asia (China) was more aggressive, especially on powders with volume and market share up compared to the last Event. But that seemed to come at the cost of Middle East volumes. South/Central America and Africa were aggressive on the AMF, while volumes by all other regions were down compared to last Event. Overall we’d call the event neutral despite coming in stronger than we were anticipating (we expected a 1.1% decline). US markets seemed to agree with US dairy complex mixed mostly lower Tuesday.
The USDA will release the January Milk Production report at 2pm Central this afternoon. We expect headline milk production to be down 0.2% YoY, which would be a slight improvement from -0.3% in December. We had some winter storms across the Plains in January that might dent milk production per cow, but we are also lapping over a very wet January in the West last January so the two could cancel each other out. We’re looking for milk production per cow to be up 0.2% but, given the weather and what we are lapping, you could argue for a stronger or weaker number. The bigger surprise is going to be around cow numbers. The herd has been trending lower since March, we are expecting some expansion during the first quarter. Yes, replacement heifers are tight, but slaughter is running 10-20% below year ago and there is a strong seasonal tendency for the herd to expand in the first quarter. Our forecast is for a 7,000 cow increase in the herd - but that would still leave it down 0.5% from last year.
Nearby Class III and Cheese firmed yesterday as spot blocks gained 4.25 cents on 2 trades to put the price back over $1.50 – narrowing the spread against a stable barrel market Tuesday. Futures don’t need to runaway to the upside given ample perceived premium to current spot market, but there remains an undercurrent of buy side interest on nearby contracts. Class III trading volume improved on the nearby bounce with over 1,500 contracts changing hands and open interest overall gained 244 contracts. March Class III continues to see open interest declines from a massive spike back in December/January (see chart below – BLUE Line).
Class IV finished Tuesday unchanged/slightly lower while new selling appeared to be the focus in NFDM and to some degree butter. Trading volumes for NFDM registered at 389 contracts and open interest rose 177 as prices slumped in most cases less than a penny across the board. This was despite a stronger than expected GDT showing across the board and specifically on SMP, which is now around $1.26/lb. equivalent. Perhaps yesterday’s GDT will serve as notice that powder prices globally can still rise despite having a clear story.
Spot butter started trading again in earnest yesterday with 15 loads changing hands – finishing up 2.5 cents at $277.500. Interestingly, butter futures closed mostly lower. We see the futures market as having adjusted “enough” for now and the buying exuberance in the derivative markets seen early in February is waning despite prices sitting at or very near their contract highs. We’ve said at times over the past week that butter futures is ripe for a downward correction. We saw a little bit of that in the March contract last week, but the price quickly recovered and made new highs since then. Still, we’ll put up one of those red flag warnings as the risk of a downward correction on butter – from a technical perspective - is high.
- Dairy
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CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
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