CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
Early Morning Update - September 28, 2023
By: Dairy Team - Chicago, Dairy Chicago
NOTE: Class IV Milk, Butter and NFDM have expanded limits today.
The 2023 Butter bull market is in full regalia as spot butter gained 12 cents Wednesday to close at a new all-time record high of $3.30/lb. That’s 30 cents higher in just three days. Have we overshot the mark? Maybe, but calling a top is a foolish endeavor. Watch price action – look for sellers to stymy the rally first. Parabolic rallies, which butter is in the midst of, tend to end rapidly but that has not yet happened. For reference, the old all-time high of $3.2675 was made last year in early October. By the end of December spot butter was nearly a dollar lower.
Butter futures continued its one-sided ascent with October and November leading the charge over $3.00 as volume nearby is starting to taper off. October open interest fell by 2 contracts yesterday, so there are just as many people getting out of positions as getting in these days. Of the over 300 contracts that traded, 120 came in the form of a July to December pack that traded at $251.500. In a $3.00 market, $2.30 budget goals are realigned to $2.50. Cream remains seasonally tight with strong multiples reported around the country. We expect to see this rally fade in October but with tightening milk supplies in the west there is a risk to continued strength counter seasonally into the end of the year.
NFDM remains choppy with a mixed trade yesterday amid a steady spot call ($117.500). The NFDM futures market has been in the midst of an important consolidation reflecting a lack of materially bullish impetus and a lack of willing derivative sellers. The market looks a little softer this morning, but 2024 offers remain rather light – and that’s where the budget-setting buyers are focused on today. Class IV Milk has seen more sell side this week, in fact, though trading volumes dropped considerably for that market yesterday. Just 63 contracts changed hands (over 400 options, however) following Tuesday’s heavy volume trade (over 1,000 contracts Tuesday).
Does a rising tide lift all boats? The jury is still out on that one because despite new all time record high butter price, nearby Class III and Cheese futures closed lower again yesterday. There is a battel brewing in the nearby futures as sellers are emboldened by the continued weakness of spot cheese – mainly on the barrel side of the equation. Buyers are looking around a the dairy complex saying “this is the only market with some depth on the offer – how long will that last?” Over 700 November Class III traded yesterday with open interest up 439 on that contract alone. New buyers and new sellers both – and the battle is just beginning as both nearby Class III and Cheese remain technically weak – and also appear to be a good value for now.
Our colleague Alfredo has been at a Food Service conference this week in Chile and was able to provide some comments on the Chilean market. Dairy consumption in Chile continues to grow. Chile has the highest GDP per capita in South America and consumers are open to new varieties of cheese around the world, particularly for hard cheeses. In September 2022, the US signed a cooperation agreement with Chile to incentivize global dairy trade so there is an expectation that Chilean imports of US cheese will increase.
Domestic milk production is able satisfy needs for fluid consumption, yogurt, and other Chilean cheese varieties. Milk production is similar to NZ where it is mostly pasture based and seasonal. 2022 was a good year that saw healthy amounts of rain which was able to boost production. As Chile enter peak production into the end of the year, El Nino will be something to watch. Similar Argentina and Brazil, Chile experienced a very warm winter.
- Dairy
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CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
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