CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
Early Morning Update - December 8, 2023
By: Dairy Team - Chicago, Dairy Chicago
Short-covering rallies are driven by traders looking to get out of short positions. Because short-covering is driven by emotion and money-flow rather than some clear supply or demand bullishness, short-covering rallies can be short lived. Class III and Cheese futures cratered Thursday following the short-covering rally Wednesday. Spot cheese closing lower emboldened the futures sell side and open interest rose for both Class III and Cheese futures on the down move yesterday. We look for some follow-through selling to kick off today, but would not be surprised if the market tried to rally back heading into the weekend as this week’s activity has had prices flopping both sides of the 20 day moving average (call it a reversion to the mean).
JAN 2024 CLASS III Futures Daily Chart with 20-day MA (RED)
Fresh cheese supply/demand anecdotes this week are mixed. While we continue to hear that there is ample fresh cheese available – in some cases at better prices than what is available during the CME spot call – and by and large still quiet demand, we also hear export activity has seen a boost in the past week or so. It’s no secret that US cheese prices were some of the least expensive over the past month and there seems to be a bit of an uptick from the otherwise sluggish export sales we’ve seen so far in Q4 (October specifically since it’s the only data we have yet).
The Class IV market cooled Thursday as new selling picked up the pace for NFDM amid weaker spot price action. At the risk of sounding like a broken record, the January to December remains tethered to the $130.000. Futures are chopping sideways here and have been since the beginning of the month. Anyone who tells you different is, in our opinion, reading into a one or two cent move a bit too much for their own good. We expect that eventually the market will pick a direction, but a mixture of order flow (budget setting buy side interest in 2024) and concerns over supplies seem to underpin the market around this goldilocks level of $130.000.
Spot butter opened and closed unchanged at $267.000 Thursday leaving the futures uninspired, mixed and lightly traded. Cream is reportedly snug so far in December but things have a way of quieting down as we roll further into mid-month. For a market like butter, that is the set up this year. Our projections too have butter sub-$2.50 by January, so on par we expect more weakness for the spot market at some point here. In the mean time, can the spot price get back over $2.70: yes, anything is possible. Look for 2024 to continue in a mixed fashion as futures sellers remain subdued against underpinning commercial buy side interest.
Slaughter of dairy cows fell considerably during the holiday week ending 11/25. Thanksgiving week is typically the week with the smallest level of slaughter volume, so a decline was expected. However, there was a nearly 5,000 head decline in the volume of dairy cows processed from last year’s levels. This week’s slaughter level represents the 5th lowest level of dairy cows harvested during the Thanksgiving week since 2005, and the lowest since 2009. With only five weeks of slaughter data left to be reported, year-to-date slaughter of dairy cows in the U.S. currently stands just 2.18% above last year. Slaughter levels have become very regional specific this year, with the upper Midwest (regions 5 and 8) and the Southwest (regions 6 and 9) accounting for the reason we still have a surplus in harvest volume. The reason is likely more a factor weather for the large volume in the Southwest.
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CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
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