VOLATILITY
July 10, 2018

The Bad Becomes Worse As Class III Futures Fall Below $15

 |  By: Anna-Lisa Laca

It’s no secret that the dairy industry has been struggling for a number of years. Really low milk prices and record high costs make for a bleak picture, one that was made worse last week by tariffs from some of our biggest trading partners.

Last week China implemented tariffs on cheese, whey and other dairy products as part of an effort to match tariffs from the Trump Administration. In an environment where cheese stockpiles are at record levels, cheese prices plummeted to their lowest levels since 2009, The Wall Street Journal reported.

The price for a 500-pound barrel of white cheddar has fallen to its lowest point since 2009, and the amount of cheese in cold storage in the U.S. is at its highest level in more than 100 years, Food Dive explained.

Milk markets are not unscathed. While grain markets made positive gains on the Chinese announcement last week, milk markets continued to erode, explains Mike North of Commodity Risk Management Group.

“The average price of Class III milk from now through the end of the year finished at $15.12, 11 cents lower than Thursday's finish,” he explained. “That was led by a failing barrel market that dropped 3 and 1/2 cents to $1.24 and ½ cents.”

Unfortunately, the price fallout did not end Friday but continued through Monday’s trading session.

“Despite positive performances in both cheese and whey, product trade was unable to undo the damage that was done in the early morning trade of Class III milk,” North explained on Monday after the market closed. “Class III markets for the balance of the year continued their path lower finishing below $15 in the average for the first time in the history of those contracts. It closes the day at $14.98. That was a 10-cent decline from Friday's finish inspired by a stronger butter trade.”

On Tuesday Class III appeared to recovering slightly, still many contracts are still below $15.

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