CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
Early Morning Update - December 6, 2023
By: Dairy Team - Chicago, Dairy Chicago
Class III and Cheese futures caught a bid Tuesday, which in turn seemed to sponsor more aggressive spot market bidding during yesterday’s cash call. Where did the buying come from? While general conversations point to rather quiet cheese demand and ample availability of fresh cheese out there, spot market sellers have been less aggressive since last week. EU cheese prices are $1.90-$2.00. GDT cheddar was up 9.7% to $1.80 yesterday. US cheese is rather cheap in the $1.50s – and likely in the $1.60s as well. We also made less cheddar in October. Not that it matters much for immediate trading – the October Dairy Products report came out Monday and is old. But again, for a market to continue lower, you need to give it a reason to do that.
Now we turn to speculative money – those guys (both big and small) are net short Class III and Cheese. When they decide to offset those positions, they have to buy something (either futures or options) to cover. And if they’re buying calls, the trader who sold those call may decide to get long futures against that short call. This may explain at least part of yesterday’s activity. Dry whey futures were also lending a supportive hand as that market closed mostly higher as well. But nothing – speculative or otherwise - happens in a bubble. If speculative shorts are buying futures (call it closing out before year end and amid less bearish news), it can cause a real reaction by other hedgers or on the spot market.
With milk production flat to lower, global cheese prices on the mend (and higher that US), probably a mild uptick in export business for Q1 recently, a lack of otherwise bearish news reduces the amount of willing sellers for a period of time. We’re in that period now. Overnight both Class III and Cheese continue to firm. We may see some increased volatility here today – especially if spot stabilizes around $1.60 short-term – but expect traders to want to buy the breaks.
Class IV, NFDM and Butter all firmed Tuesday despite a lower-than-expected showing from the GDT auction AND lower spot market price action. Spot butter remains the highest butter price on the board, so we can say gains there were extended to some degree by a desire of the market to close the spot/futures price spread. NFDM doesn’t have that same story. Spot NFDM remains sub-$120.000 with all 2024 futures north of $120.000 – and firming yesterday. Part of this is explained by the lukewarm price level attracting some end-user buy side interest. This is not a red-hot $250.000 butter market - $130.000 for 2024 is a “reasonable” price level given flat to lower milk production in the US, and uncertainty around Oceania weather heading into 2024. Not to mention what we’ll call “spotty” export demand for US product. We look for a mixed trade on Butter and NFDM to kick off today.
The GDT price index fell short of the futures price expectations this auction, but still moved higher by 1.6%. Price increases were seen across nearly every contract with AMF being the only exception. Powder prices (BMP, SMP, and WMP) moved higher across all contract periods providing the foundation for the increase in the GDT price index.
North Asia purchases (which includes China) moved lower from both last event and last year. Southeast Asian demand did improve from last event, but continues to fall short of year-ago levels. Total volume available on the auction was nearly 1,000 MT higher than last year’s levels, but volume actually sold was nearly the same as last year. Minor regions like Europe, Africa, and the Americas helped to pick up some of the reduced purchase volume by North Asia.
Overnight grain market volume picked up a bit with soybeans leading the way there, but Wheat continues to drive market gains as it comes off lows over the past week-plus. Market bulls will need further ammunition (more export sales news, etc.) to sustain the rally during a fairly slow fundamental period.
- Dairy
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CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
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