CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
Early Morning Update - November 28, 2023
By: Dairy Team - Chicago, Dairy Chicago
Class III and Cheese volume surged to kick off the final week of November as prices remained rather mixed. There was a good two-sided trade early as early futures price weakness gave way to a modest rally as spot cheese prices moved higher intrasession. Then selling came in. Spot prices still closed higher but were knocked off their intraday high and that left little to worry about from a futures buyer perspective. And sellers – they’re short and happy to add to those shorts as prices tip-toed into new contract low territory.
Our dairy farm phone lines are not ringing off the hook with new sell orders (at least nearby contracts), so who is selling? According to the CFTC its “Managed Money” and the “Other” categories.
Managed money are the larger, professionally registered speculators. The Other category? Those are the smaller traders that could be hedge and could be speculative but they all do not need to report to the CFTC since they carry less than 25 contracts in any given month. Both categories are weighted to short side all year, but what caught our attention in yesterday’ afternoon’s delayed release of the weekly CFTC report was the new 3-year net record short position held by the Other category. In the last week, over 1,200 new short positions (futures and options) were accumulated by smaller but no less important Other category traders.
Given that the large specs and the small specs (and smaller hedgers) are loaded up short, there seems to be plenty of ammunition to keep a weight on futures prices amid a struggling spot market. At least some of these traders are the “add to winners” types forgo finding a market top and instead focus on selling into weakness. Right now the wind seems to be at their back.
Despite a little bubbling up of spot prices yesterday, it remains to be seen if there is any material new demand or pipe-line refilling that will not be handled with ease around current price levels. And given the futures premium to spot, there remains some incentive to continue to whittle away at the forward curve by selling especially if it improves your daily statement unrealized P/L. We highlight this to help illuminate the “who” in who is selling today. But we also mention to remind our readers that there are a lot of folks loaded up on the short side of the market – some of whom have a proclivity to cut and run when that unrealized P/L starts to shrink.
While Class III volume registered at over 2,800 contracts yesterday, Class IV volume also surged. On Monday, 426 Class IV contracts traded, which is nearly double the best volume trading day of the month thus far. Unlike Class III, which saw a third of yesterday’s trade volume in the December 2023 contract alone, all of yesterday’s Class IV volume transacted next year. Most of the trading in the second half, which fined the day at $19.74 ($1.12/cwt higher than Class III). Relatively stable second half NFDM and Butter futures prices likely helped with keeping the Class IV price action mostly around unchanged from last Wednesday’s close.
“Relatively stable” seems a good descriptor for both butter and NFDM recently but for different reasons. The butter spot/futures trade is relatively flat but there is some expectation that we work into a “carry” structure as we move into December. NFDM futures are in a carry market already and don’t seem to have a story to advance prices higher at this time. But with unknowns around demand and El Nino heading into the new year, it appears keeping some forward curve risk premium in the market is comfortable for the market today. Both futures markets were higher yesterday at least in part due to budget-setting end users bids into otherwise light sell side. Unlike Class III and Cheese, it seems Butter and Powder sellers need a little more coaxing to be aggressive around current levels.
- Dairy
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CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
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