The Class III/Cheese futures strength continued Wednesday another round of firming spot price action. Block cheese gained 5 cents to close at $1.5600 on 3 trades – the highest price since December 14 when Block cheese settled at $1.5700. Barrel cheese finished a penny higher at $1.4800 on 14 trades. So there is cheese out there, but the aggressive selling seen at the end of 2023 seems to have subsided. At the same time, spot buyers have become more aggressive or more willing to push prices up. And futures have kept pace and premium versus spot this week.
Over 1,600 Class III contracts changed hands and open interest was up 3. Just 3 contracts yesterday. This tells us there was a lot of positions changing hands in Class III. Open interest in February – the lead contract month – was down 123 contracts in Class III and 38 in Cheese. Likely a mix of short covering and long-liquidation (short-term traders who bought earlier this week taking profit by selling). Over 600 Cheese futures traded yesterday with Open Interest up 152 contracts. Class III and Cheese was higher again (nearby) overnight, but we expect a good two-sided trade today.
Spot butter remained unchanged yesterday after the 3.75 cent jump on Tuesday. That seemed to bring some follow through buying as 2024 buy side interest remains healthy. Sell side interest pulled backed yesterday so that caused futures volume to dwindle to 90 contracts as nearby months were up as much as 4.25 cents. Q1 prices, as seen below, are nearing levels of resistance between 260-262 so we’ll see how trade develops today and potentially see more sell side come in.
After a 2.5 cent jump in nonfat on Tuesday, prices pulled 1.25 cents yesterday which put some pressure on nearby futures. Q3 futures saw some support on light volume as futures remain rather sideways awaiting fresh news. Rumors of a new Algerian tender were circling in the last week and details of the tender were released this morning. Roughly 15k MT of WMP and 22k MT of SMP were purchased with delivery set March-May.
Soybeans and oils are leading the way higher this morning but the grain complex remains range-bound and confined very close to move lows overall, ahead of tomorrow’s wide-ranging USDA January reports date.
The USDA will release a slew of reports on tomorrow at 11 AM Central including the USDA WASDE, Crop Production, Quarterly Grain Stocks, and Winter Wheat Seedings. The Reuters survey of analysts estimates 2023/24 World soybean carryout at 111.58 MMT—close to 3 MMT lower than the December WASDE report. The trade expected World corn carryout to land at 313.03 on the January WASDE—down from 315.22 on the December report.
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