The milk markets opened higher this Tuesday, appearing to continue the rally we have seen since Independence Day. The biggest mover was August class III, rallying 20 cents ahead of spot. The optimism was there and the bulls were in the markets, ready to push higher. Then the physical traders came.
Spot cheese opened at 10:00 AM to trade a penny and a half higher, following the sentiment from the futures market this morning. Then the sellers came in. $1.96 may have been the number they were looking for, or they just had a lot to sell after the holiday. But 15 trades followed to bring barrels back to unchanged at $1.94. Blocks were up ¾ cents to $1.9675.
The futures market reacted in a volatile fashion with the board swinging from green to a deep red. Again, August class III was the biggest mover post-spot, finishing the day down 30 cents. What does that say about the mentality of the market? Well, open interest was up 312 contracts in class III, but with June’s recent settlement, I would expect open interest to increase over the next week anyway.
I see optimism in the market that is shaken easily by the spot market and other news. The market is looking for reasons to be bullish and finding none other than the bird flu; That is the biggest uncertainty. So far it has not appeared to make a significant impact on the supply side. California and Pennsylvania had lower than expected milk production in the last report so that could be a sign of spreading, but that’s just a guess. Right now the market is trading sideways until something pushes it one way or the other.
Butter traded a penny higher at spot, but not much has changed. We continue to wait and see if the summer will bring seasonal supply issues typically seen. We’ve heard that cream is tightening in select regions of the country, but demand has softened as well.
This week’s NDPSR report is expected to be fairly quiet. Cheese prices are expected to be mixed and whey prices higher, while butter and non-fat prices are expected to stay steady.
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