|Milk futures have been sheltered so far from the panic selling that has gripped most commodity markets|
|Written by Administrator|
|Friday, 06 May 2011 07:55|
Milk futures have been sheltered so far from the panic selling that has gripped most commodity markets. The selling that shaved $20 off Crude Oil futures and cut some markets as much as 30% in weeks, has been tied to large institutional and traditional funds taking risk off the table. Speculators are betting large sums of money that future milk prices will both rise and fall. The lions share of those speculators however are not large funds, they are Industry insiders. Large Producers, Processors, Brokers, retired executives, International traders, you name it. The funds that are in the milk markets are for the most part run by brokers that manage Industry accounts. The market is just too small and illiquid for the Institutional investor to navigate. Therefore their selling pressure has very little implication on our market. At-least for the moment. Now at this moment in milk history, Industry Insiders are unsure of market direction. Both sides of the trade have been neutralized. In fact, as seen in the last Commitment of traders report, speculators betting the upside vs speculators betting the downside are virtually net flat. Commercials hedging the downside vs commercials hedging the upside are also virtually net flat.
Don't get me wrong, if cheese starts to fall back under $1.60 all bets are off. But that move happened weeks ago when macro economic forces supported the milk price collapse. Now as the bigger markets fall, dairy is just sitting idle and attention is turning away from cash flow and towards the fundamentals. Cheese is apparently always long in this country, made evident by the constant selling pressure in the Cash market. Buyers however are willing to take the production offered daily at the exchange at these prices as opposed to making it themselves. Cheese is by no means expensive at $1.65 per pound. The room to the upside is always greater than the tight space below. Both Whey powder and WPC's continue to appreciate. Secondary markets have whey trading over 60 cents per lb. Futures markets have June whey already at 51.50 cents per lb. Not exactly the information you want to see when thinking of shorting class 3 milk contracts. Regarding Class 4, there is not one 2011 contract offered in the Butter futures market under $2.00 per lb. Butter can go up, butter can go down. But we are in the flush now and summer heat is just too big a variable. I know its always hot during the summer but weather patterns this year fallen dramatically outside of 2 standard deviations from the mean. In fact the storms that hit the southeast a week ago were reported to only happen 4 tenths of 1% of the time. The summer might be cold, who knows, but buyers aren't hedging that bet at the moment. NASS this morning reported that for week ending April 30th NFDM averaged $1.60 per lb. July deliver of SMP in New Zealand jumped 11% from just two weeks ago to just pennies under $2 per lb.
July Corn down 10.25 cents to $6.9850 per bushel
July Beans down 3 cents to $13.1875 per bushel
July Wheat up 1 cent to $7.55 per bushel
June Cattle up 25 cents to $110 per cwt
June Gold up $12.6 to $1494 per ounce
June Crude up 50 cents to $100.30 per barrel (traded down to $94.63 overnight)
June Class 3 unchanged at $17.10 per cwt
2nd 1/2 Class 3 down 2 cents to $17.62 per cwt
Ronald K. O'Brien IIRKO2 Futures & Options LLC