CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
Early Morning Update - January 23, 2025
By: Dairy Team - Chicago, Dairy Chicago
Follow through selling from Tuesday’s limit down move continued in Class III and Cheese aided by more weakness in dry whey futures as well. Spot cheese prices finished weaker but buyers stepped in nearby the intrasession low, particularly in blocks. Blocks traded down as much as 3 cents at $1.75 before a buyer bid it back up to $1.775 with 6 bids left unfilled. Barrels also finished about 1.5 cents from their intrasession low.
Class III futures tried to push higher after the slight recovery in spot but failed to do so into the afternoon and finished closer to their lows. Futures are looking to open higher this morning given the recent sell off and the fact that futures are approaching contract lows there might be more buying interest stepping in today. Class III futures volume yesterday surpassed 4,000 contracts, the largest daily volume since October of 2023. Over half of that volume was in February and March as we saw the Feb/Mar spread trade over 400x for a second straight day. Open interest in February continued to decline but at a lesser pace by 76 contracts so there was likely continued long liquidation there as positions were rolled. Cheese futures volume wasn’t able to outpace Tuesday’s level as roughly 1200 contracts traded with open interest rising by 369 contracts.
The USDA will release the December Milk Production report on Friday afternoon U.S. time. Usually it makes sense to talk about the expected change in the number of dairy cows and the expected change in milk production per cow to work out the total milk production forecast, but with the bird flu issues in California it makes more sense to talk about production in California and production in the rest of the country to work up to a total production forecast.
Given what we’ve heard anecdotally we’re expecting production in California during December to be down 6.5%, which would be a small improvement from the -9.2% that we saw in November. Given the good margins and decent weather in December we expect production in the rest of the country was up 1.0%, which would be a small improvement from +0.8% in November. That combines to headline U.S. production being down 0.4% from the previous year (compared to -1% in November). We should keep in mind that this is a quarterly Milk Production report where the methodology is a little more rigorous and there could be significant revisions.
While headline production will most likely be down from the previous year, the components in the milk during December were strong, partly due to lapping over some weakness in the previous year. So even with headline production down 0.4%, component adjusted production would be up about 1.5% for the month.
The USDA will release the December Cold Storage report Friday afternoon. I don’t think we’ll see anything surprising on cheese. Cheese makers have been doing a good job of matching production to sales, so stocks are forecast to be down 7.3% compared to the previous year in December, very similar to the -7.2% that we saw in November.
Butter is a tough one. There was plenty of cream available and butter production was probably strong. Retail butter sales were strong in December, but we *think* retailers had front-loaded the commodity purchases a bit so we’re assuming that domestic disappearance dropped off in December and inventories built a bit, up 6.3% YoY compared to just +0.4% in November. But the way the spot butter market bounced in mid-Dec to early Jan suggests that maybe retailers weren’t front loaded which would the risk is domestic disappearance didn’t slow in Dec and stocks come in lower than expected.
NFDM futures bounced Wednesday on light volume while butter futures sold off on heavy. 552 butter contracts changed hands and open interest increased by a whopping 418 contracts. Everyone, it seemed, was getting into new positions yesterday but sellers were the aggressors. The forward curve premium enticing new sell side ought to continue today.
- Dairy
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CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
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