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Butter Prices top $2.00; Highest Price since December 2004 PDF Print E-mail
Written by Administrator   
Friday, 20 August 2010 06:51

Butter Prices Top $2.00; Highest Price since December 2004

http://www.cmegroup.com/daily_bulletin/Section04_Agricultural_Soft_AltInvestment_Futures_2010160.pdf

 

8/19  Class III Futures:   Volume:  771  Open Interest (OI) Change:  +256  Total OI:  26,377

8/19  Class III Options:  Est. Put Volume:  309   Total OI:  20,063   Est. Call Volume:  99 Total OI:  18,061
8/19  Spot Markets:   Block Cheese $1.6375 (UP 3/4),  Barrel Cheese $1.5950 (UNCH),  Butter $2.03 (UP 7 3/4),  NFDM: A $1.20 (UNCH),  X $1.2250 (UNCH)

8/19  Other Dairy Futures Volume:   Butter:  63  Dry Whey:  18   NFDM:  33   Class IV:  14   Cheese:  71    International SMP:  0

 

8/19 Individual Class III Futures Prices, Change, Volume & Open Interest
Aug         $15.09                DOWN 1                   Vol:  6                  OI Change:   UP 3
Sep          $15.38               UP 1                           Vol:   156             OI Change:   DOWN 21
Oct          $15.08                DOWN 5                   Vol:  252             OI Change:    UP 160
Nov         $14.68                DOWN 6                   Vol:  70               OI Change:    UP 2
Dec         $14.52                DOWN 5                   Vol:  51                 OI Change:    UP 13
Aug-Dec 2010 Avg:  $14.95                    DOWN 0.03/cwt
Jan-Dec 2011 Avg:  $14.48                      DOWN 0.03/cwt

While the industry was busy digesting a 3.0% higher July Milk Production report yesterday morning, spot butter prices jumped nearly eight cents to finish at $2.03/lb, the highest settlement at the CME since December 2, 2004.   Weeks ago it appeared to be a foregone conclusion that butter prices would reach the $2 level but most did not expect such a swift move in spot prices yesterday.   October butter futures moved up the limit (five cents) and 0.50 to 3.25 cents higher in the rest of the 2010 months.   For the most part, 2011 butter futures are holding back from participating in the current bull market, though January did finish a penny higher.   While there were five trades in the spot butter market yesterday, we still believe that legitimate tightness in supply, strong cream demand and committed butter exports through CWT will keep prices firm today.

 

Class III futures opened lower yesterday on market reaction from the bearish Milk Production report and failed to produce any enthusiasm with higher CME spot block and butter prices.   September & October futures appear to be holding their ground as current spot suggest  $15.52 Class III, but trader optimism to hold current cheese levels beyond October are waning and producing an even steeper inverse futures curve.   In particular, 1st half Class III futures are now down to a $14.12 average (~$1.54 cheese price) as sellers are getting aggressive locking in profitability.   Three straight months of bearish Milk Production reports and a healthy heifer replacement figure undoubtedly have producers nervous about the long term longevity of above average milk prices.   Overnight trade is 1-11 cents lower on light volume and we look for volume to be light today as traders eye this afternoon’s Cold Storage report for further supply side direction.

 

USDA released weekly dairy cow slaughter data yesterday morning and double digit year over year growth continues for the second straight week.  For the week ending August 7, 56,600 head were sent to slaughter, up 13.4% vs. the corresponding week last year and year to date lagging only 3.8% behind 2009.

 

The July Cold Storage report will be released this afternoon at 2PM Central Time.   We are looking for butter stocks to be almost 30% lower, American Cheese to be approximately 5% higher and Total Cheese stocks to come in around 4% higher than 2009.  Total cheese stocks are projected to be above one billion lbs for the fifth straight month.  We will provide commentary on that report later this afternoon.c

Corn prices re-tested - and failed to take out - the high futures price print established back on August 5.  We never know when the traders have fully adjusted prices to accommodate the smaller supply from bad weather, but we know it takes less time than we think.  We also know that harvest selling pressure is right around the corner.  Without more bad news to entice market bulls, prices may have already made its peak.  We expect that this is the case and continue to recommend the purchase on put options for both dairymen and those farmers who have unsold bushels.  Not having a floor on these markets is too optimistic.   

 
August 19 - USDA Reports International Prices PDF Print E-mail
Written by Administrator   
Thursday, 19 August 2010 09:11

USDA Released their bi-weekly international prices today.   Of note:  Oceania butter prices back on the rise, EU

dry whey prices increased sharply vs. last report and the firm undertones of all EU commodity comments listed

below.

 

Oceania (vs. Aug 5 report)

Butter:   $1.8370 (UP $0.0453)

Skim Milk Powder:   $1.3607  (UP  $0.0169)

Whole Milk Powder:   $1.4288 (NO CHANGE)

Cheddar Cheese:  $1.7690 (NO CHANGE)

 

Western Europe

Butter:   $2.2396 (DOWN $0.0057)

Skim Milk Powder:   $1.2871 (DOWN $0.0794)

Whole Milk Powder:  $1.6273 (DOWN $0.034)

Whey Powder:  $0.4536  (UP $0.0681)

 

 

OCEANIA COMMENTARY

 

CHEDDAR CHEESE:  Cheese markets and prices in the Oceania region are holding steady.  
The new cheese production season is just about to resume as milk volumes start to 
increase.  Cheese plants are ready to go as winter maintenance is now basically 
completed.  Cheese handlers are stating that seasonal carryover stocks are low 
and they will be entering the new year at a comfortable level.  Pre-season sales 
have been good and are in line with previous years and projections.
 
WHOLE MILK POWDER (WMP):  Whole milk powder markets and prices are firm.  Lower 
prices recorded at the recent global/Dairy Trading event did ease some commercial 
pricing, but for the most part, prices remain stable to slightly higher.  Traders 
and handlers are speculating that the trading event prices will soon be increasing.  
The Oceania milk production season is underway, especially in New Zealand, with 
increases still a few weeks away in Australia.  Some manufacturers and handlers 
are stating that good whole milk commitments are already on the sales books, thus 
early season milk volumes will probably be cleared in this direction.     
 
SKIM MILK POWDER (SMP):  Oceania skim milk powder markets and prices are mixed, 
although the market undertone is firm.  Lower prices realized at the recent 
global/Dairy Trading event had little impact on overall pricing of Oceania 
supplies.  Some traders and handlers eased their prices slightly, but in most 
instances, stable prices remain.  Many traders feel that prices will stabilize 
at the upcoming trading event on September 7 and will probably increase in the 
near future.  Milk production remains seasonally low, but increasing, thus stocks 
of new powder remain limited.
 
BUTTER:  Oceania butter markets and prices are firm.  Butterfat volumes remain 
limited as milk volumes are seasonally low, but increasing.  The 2010 - 2011 milk 
production season in now underway with milk volumes noticeably increasing in New 
Zealand with Australian output still at low levels.  As milk volumes increase, 
the direction of early season milk volumes is often in question.  Some manufacturers 
are stating that good whole milk volumes have been pre-sold, thus they feel early 
season milk volumes will be cleared into whole milk production, further limiting cream 
volumes for butter production.  Usually, milk volumes increase at a pace that these 
diversions will not last too long.  Traders and handlers are stating that regular 
and ongoing customer needs during the next few months are already on the sales books, 
with some additional buyer interest developing.  At this time, these buyers remain 
cautious with their purchases and Oceania suppliers are cautious with their 
commitments.      
   
OCEANIA OVERVIEW:  Milk production increases are starting to be reported out of New 
Zealand.  Milk handlers are stating that the increases are not huge, but noticeable.  
In Australia, the beginning of the new milk production season is still a number of 
weeks away.  Late winter weather conditions and temperatures continue to prevail.  
Grass growth remains dormant.  Final milk production figures out of Australia were 
recently released for the 2009 - 2010 milk production year (July - June).  As has 
been the case for much of the second half of the production year, end of season milk 
output has been stronger than previous year comparables.  For June, milk output was 
4.6% heavier than June 2009, thus the cumulative output for the year was down 3.9% 
from the 2008 - 2009 year.  Although the cumulative total still lagged the previous 
season, milk producers and handlers were pleased to see that the decline was much 
smaller than early season predictions.  The 2009 - 2010 season ended on a positive 
note.  Australian farmers are optimistic about the upcoming milk production season 
as conditions are very good for a strong start to the season.  Farmers and milk 
handlers are stating that the milking herd ended the previous season on a positive 
note and wintered well, thus a positive start is also expected due to these factors.  
Typical winter weather patterns, not seen in many years in Australia, provided much 
needed moisture to replenish depleted water levels and reserves.  With many positive 
factors pointing to a good milk production season in Australia, milk handlers are 
questioning how farmers will handle the financial end.  Many feel that farmers will 
be conservative and pay down debt incurred in recent years versus expanding their 
operations.  Following the August 3 global/Dairy Trading event, Oceania handlers and 
traders adjusted their prices somewhat, but often not to the average level of the 
various products traded.  Traders and handlers continue to state that this is an 
auction which provides a market sentiment at that time, but is not setting ongoing 
price levels.  Traders and handlers are speculating that recent price weakness at 
the trading event will stabilize and will probably start to increase in the near 
future.  In September, trading will go to twice a month with the next event on 
September 7.  As milk production seasonally increases, manufacturers and handlers 
are deciding which direction to go with early milk volumes.  Many traders and 
handlers state that good whole milk powder volumes are already in the sales books, 
thus initial milk volumes will probably be cleared in this direction.  New buyer 
interest remains slow in developing as buyers are cautious with their purchases.

      

 

EU COMMENTARY

 

SKIM MILK POWDER (SMP):  European skim milk powder markets are mixed although the 
undertone is firm.  Prices are steady to slightly lower.  Much of the current 
weakness in price is being attributed to the weak Euro against the U.S. dollar.  
Stocks of powder are readily available for potential buyer interest.  Much of 
Europe has been on holiday during August and sales have been limited.  Traders and 
handlers are stating that buyer interest is starting to develop as the summer 
holiday season ends and buyers look for fall/winter needs.  Powder production 
was slow to develop this season, but, in recent weeks, has attained stronger output.
 
WHOLE MILK POWDER (WMP):  European whole milk powder markets are generally steady 
although prices eased slightly.  The significant portion of weakening prices is 
from the Euro/U.S. dollar conversion.  Within the past two weeks, the Euro has 
declined against the dollar.  European milk production is declining, thus whole 
milk powder production is trending lower.  Traders and handlers are stating that 
stocks are available for buyer interest.  The European summer holiday season is 
winding down, thus traders feel that buyers may be returning to the market 
within the next 2 - 4 weeks.
 
BUTTER/BUTTEROIL:  European butter markets and prices remain firm.  Milk production 
is declining seasonally in Europe, thus is butter output.  For much of the season, 
cream volumes have been limited and butter production has not been as strong as 
desired or projected.  Cream handlers are stating that butterfat tests within 
milk are lower this year.  This trend is not just limited to European milk output 
as this situation is also occurring in the U.S.  The Dairy Management Committee 
will once again meet on August 26 after being on holiday since late July.  Reports 
indicate that there are about 1,500 MT of intervention butter left for possible 
sellback.
 
SWEET WHEY POWDER:  European whey powder markets and prices are firm.  Prices have 
been fluctuating both higher and lower over the past few weeks.  Cheese production 
was strong early in the current milk production season, but now has eased as milk 
output declines and milk is being directed toward other manufactured dairy products.  
Whey stocks are available with most market activity centered around an internal or 
domestic market.  Traders and handlers are stating that European stocks are often 
priced higher than international buyers are willing to pay.   
 
WESTERN OVERVIEW:  The European milk production season continues to decline.  Milk 
volumes appear to be holding up quite well on the down side of the season with early
reports indicating that June's production was 2% above the previous year.  On a year 
to date basis, milk output is about par with last year.  Within recent weeks, heat 
and humidity levels have been high in many regions and will probably accelerate the 
seasonal decline.  August is summer holiday time for many Europeans thus sales activity 
has been slow.  Traders and handlers do indicate that Russian buyer interest continues, 
but often European prices are higher than desired, thus some buyers are looking beyond 
European borders for possible stocks.  Whole and skim milk powder, along with cheese 
are items of most interest.  Traders also are stating that some new buyer interest is 
developing as buyers start to look to fill fall/winter needs.  For the most part, outside 
of butterfat, stocks are available for immediate and future needs.  Early in the milk 
production season, milk volumes were being directed towards cheese output, but now other 
manufactured dairy products are realizing a better milk flow.  The Dairy Management 
Committee will be returning from summer holiday on August 26 for the first time since 
late July.  Traders and handlers are wondering if the balance of intervention butter 
(about 1,500 MT) will be cleared.  Butterfat continues to be a limited item and previous 
sales of intervention butter were a welcomed item by many.  Some butter/anhydrous milk 
fat from the U.S. is potentially scheduled to arrive in Europe during the next six months.   
Last Updated ( Thursday, 19 August 2010 09:42 )
 
Foreign Countries on the Corn buying Warpath PDF Print E-mail
Written by Administrator   
Thursday, 19 August 2010 07:48
Corn Export Sales for week ending Aug 12th:  
Net sales of 594,900 MT for delivery in 2009/10 were up 35 percent from the previous week and 22 percent from the prior 4-week average.
Net sales of 2,293,700 MT for delivery in 2010/11 were mainly for unknown destinations (713,900 MT), Mexico (480,100 MT), Japan (446,500 MT), and Egypt (240,000 MT).
Exports of 1,006,100 MT were unchanged from the previous week and up 1 percent from the prior 4-week average.  
The primary destinations were China (241,600 MT), South Korea (222,100 MT), Japan (171,400 MT), Mexico (104,100 MT), Venezuela (79,200 MT), and Taiwan (71,100 MT). 

The Sales of over 2 million tons of new crop corn occurred even as corn prices were 50 cents per bushel higher than the previous month and a US Dollar Index that was near 2% firmer. 
 
8-19-10 Kurzawski/Meyer Dairy Market Commentary PDF Print E-mail
Written by Administrator   
Thursday, 19 August 2010 07:47

Milk Production Report Bearish; Class III Futures Slightly Lower

http://www.cmegroup.com/daily_bulletin/Section04_Agricultural_Soft_AltInvestment_Futures_2010159.pdf

8/18  Class III Futures:   Volume:  747  Open Interest (OI) Change:  +153  Total OI:  26,121

8/18  Class III Options:  Est. Put Volume:  152   Total OI:  19,959   Est. Call Volume:  446 Total OI:  17,820
8/18  Spot Markets:   Block Cheese $1.63 (UP 1),  Barrel Cheese $1.5950 (UP 1),  Butter $1.9525 (UP 2 3/4),  NFDM: A $1.20 (DOWN 1),  X $1.2250 (UNCH)

8/18  Other Dairy Futures Volume:   Butter:  99  Dry Whey:  14   NFDM:  24   Class IV:  19   Cheese:  16    International SMP:  0

 

8/18 Individual Class III Futures Prices, Change, Volume & Open Interest
Aug         $15.10                  UP 3                         Vol:  14                OI Change:   UP 8
Sep          $15.37                UP 5                          Vol:   127             OI Change:   DOWN 37
Oct          $15.13                 UP 7                          Vol:  254             OI Change:    UP 57
Nov         $14.74                 UP 3                         Vol:  53                OI Change:    DOWN 14
Dec         $14.57                 UP 1                           Vol:  43               OI Change:    UP 6
Aug-Dec 2010 Avg:  $14.98                   UP 0.04/cwt
Jan-Dec 2011 Avg:  $14.51                      UP 0.01/cwt

Milk Production Comments

In our monthly analysis of the Milk Production Reports since April, we have concluded that US dairymen have made the supply side whole coming out of the dismal 2009 marketing year.  July’s report confirms that theory.  While yesterday’s numbers can be considered bearish because it outpaced economists’ expectations for the fourth straight report, no one should be surprised at the resolve of dairy producers to make more milk when the conditions are right.   Western states took the brunt of the pain during the low milk price cycle in 2009 and have rebounded strongly in 2010 assisted by a mild summer.  Increases in Western states like California (UP 4.7%), Washington (UP 6.2%), Arizona (UP 8.8%) and Idaho (UP 5.2%) are lifting the overall numbers this month.

 

The most bearish numbers in this report are the cow numbers; UP 20,000 head vs. last month – that’s an impressive figure given the fact that producer margins are not all that great.  However, when digging into the numbers, Arizona, Idaho, Oregon & Texas all had significant month over month increases and represented nearly 90% of the cow number increase, suggesting that new money has flowed into these areas to start up new dairies or fill barns left empty by dairymen that exited the business last year.

 

The number that many might not be looking at this morning is Wisconsin production that has been so strong over the past 12 months.   Wisconsin came in only 2.2% higher; significantly lower than the previous 12 month average of 5% growth.  The talk over the last few weeks has been that heat and humidity have taken their toll on total production and component levels in the Upper Midwest and it appears the impact of that heat is starting to show up in the numbers.

 

No one is denying that the supply side of the dairy market is strong and continues to grow.   We will likely see cow number gains and milk per cow gains through at least the rest of 2010 if not beyond.  However, the industry has shrugged off the last two bearish Milk Production and Cold Storage reports and futures and spot prices continue to trend higher.   We know that exports have been strong in 2010 and we continue to hear reports that demand has remained consistent during the latest cheese price rally.  Initial kneejerk reactions were lower but futures only traded down 13-14 cents in Oct & Nov and have rebounded this morning to single digit losses on decent overnight volume.  Don’t be surprised if cheese prices continue their upward movement today and Class III & cheese futures end the day firm.

 

Daily Comments

 

After a few day hiatus, buyers in CME spot cheese resumed their willingness to acquire product at higher prices, taking both blocks and barrels up a penny.  Class III futures volume continues to be light and while trading was 10-15 cents higher after the spot session, traders decided to take cover prior to the Milk Production report and futures prices settled just slightly higher yesterday.   Per our comments above, overnight trade was relatively heavy (over 150 contracts so far) and lower and we expect the market to sort through the report and await the behavior of the spot market to determine today’s futures direction.

 

Yesterday, the US Dairy Export Council issued a press release (see attached) expressing disappointment at the announcement by the Mexican government that it would impost tariffs of 20-25% on several major categories of US exports to Mexico, including many cheeses. This is in direct retaliation to the US not being in compliance with NAFTA transportation obligations.  According to USDEC, this action by Mexico will have an impact on US exports of cheddar, mozzarella, gouda, provolone, Colby, Monterey Jack, cream cheese and many other cheeses.   We have not yet heard when these tariffs go into effect but thus far in 2010 (Jan-June), 44 million lbs of cheese have been exported to Mexico and is this country’s largest dairy trading partner.  This could have a bearish impact on US cheese prices if the dispute does not get resolved quickly.   We will continue to provide you with the latest news on this developing story.

 

CME spot butter prices also resumed their upward track yesterday, up 2 ¾ cents to $1.9525 on bids only on what many think is an inevitable run towards $2.  Futures prices rose 0.25 to 1.75 cents yesterday on solid volume.  

 

Wheat prices were on the rise again overnight as rumors are circulating about Russia needing to import 5MMT of grains to satisfy demand at home.  This has not yet actually happened; it is a rumor at this point.  Corn prices we slightly higher overnight but futures prices are within pennies of strong daily, weekly and monthly resistance levels.   

 

The Pro Farmer Tour will wrap up today.  Corn yields in IL were seen unchanged from last year, but down 2.2% from the 3-year average.  Hot/dry temps the past month appear to be limiting the crop size in some areas.  


 
Corrections to "Morning" PDF Print E-mail
Written by Administrator   
Thursday, 19 August 2010 07:46
Index and Traditional funds are long Corn by 762,650 contracts
Aug 1st Cattle on Feed will be released tomorrow.
--
Ron O'Brien
(312) 446-1565
www.rko2.com
 
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