CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
Early Morning Update - April 23, 2024
By: Dairy Team - Chicago, Dairy Chicago
NOTE: Class III, Cheese, Block and Dry Whey Futures have Expanded Limits Today.
Class III and Cheese futures markets continued it wild ascent for a seventh day Monday with nearby Class III revisiting the most recent 2024 high established back in late February. The picture below is of the May contract, which has erased all of the poor demand price weakness that plagued Class III – and dairy farmers – over the past two months. And the main takeaway here is that when a pattern changes in the market, it’s more like hitting your head on a cabinet door than a soft tap on the shoulder.
Both Block and Barrel cheese prices were strong Monday – clearing the $1.70 level with ease and closing at new 2024 high prices. $1.68/$1.70 is now cheese support (technically). Are we on our way to $2.00? Possibly, but expect some cheese to show up here as sellers will likely reward this rally. We expect the market to chop around here in the $1.70s short-term and as such, expect volatility to increase on futures this week. Early this morning, nearby Class III and Cheese are trading lower and we more or less expect more futures weakness as the market consolidates the recent rally. Also look for nearby futures to attempt convergence with spot prices.
Class III and Cheese futures – along with the other markets – have to contend with what we’re calling a “neutral” milk production report. U.S. milk production for March was down 1.0% from last year which was a little better than the -1.2% forecast. No real major surprises there but cow numbers continue to decline, down 7,000 head but right in line with our expectations. Production for January and February were also revised higher with a larger dairy herd than initially reported. A revision of +0.5% for February was a bit of a surprise and a bearish one at that, particularly in light of the fact that we had a high solids disappearance already during Feb.
Bigger picture: we’re watching, thinking about and debating the fact that both culling and cow numbers are both generally heading in the same direction – lower. Yes the herd expanded 19,000 head in February and there are likely more revisions on these numbers forthcoming. But there is also a distinct possibility that lower culling and shrinking herd is reflective of a lack of heifer replacements. The bigger concern here is the US dairy farmers ability – or inability - to respond to a call for milk.
As if to say “hold my beer and watch this” spot butter printed $3.00 for the first time since November 10th yesterday led in part by early and sporadic futures buying. We’ve long said that the biggest demand out there today is for butter futures rather than butter itself and that same thought process seems to hold water this week. New contract highs were made yesterday, but we hear cream is widely available and demand for bulk butter is limited. Some traders are more worried about getting coverage – and last week’s modest correction left a lot to be desired. Perhaps they are worried about this flu issue being more widespread than what is being reported. Whatever the thought process over the past week, there was a clear "don't wait around to find out" mentality in yesterday’s butter trade.
NFDM is in another time and place it seems. This is the one that doesn’t look like the others. We cite weak global demand as the main driver of this sideways, choppy and otherwise rather weak trade for NFDM. Prices were lower at the GDT Pulse auction this morning. Fonterra's regular WMP was down 1.1% from the GDT Event last week while their SMP was down 2.0%. I think it is mostly a demand story with China still weak and other importers stocked up on production in Q4/Jan/Feb and have backed away from the market for a little while.
- Dairy
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CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
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