January 17, 2017

Could CME Spot Prices Become More Vulnerable?

 |  By: Know Your Market

By Mike North, Commodity Risk Management

Each Friday the USDA publishes its dairy market news report and sums up the weeks activity amid processors across the country. Here is an excerpt from the cheese section of that report:

Cheese production is active throughout the country this week although winter storms have caused some delays in North Eastern production schedules.

Plentiful milk is reported in the west and Midwest as more educational institutions return from the holiday break. Midwestern contacts expect readily available milk into next week. Food service orders in the Northeast are steady but a bit slower in the Midwest.

Retail demand is fair to strong again this week. Mozzarella demand in the West is beginning to build for prime pizza season: football playoffs and the Super Bowl.

Stocks of fresh blocks are a little harder to find whereas aged blocks and barrels remain available.

This helps provide a little insight into what has been happening in recent CME spot trades, as block cheese has maintained a premium working its way higher to prices we haven’t seen since mid-December. The danger in this of course is that as processors seek less fresh product CME spot prices become vulnerable to greater price decline, a trend that has been in place since early November.