August 29, 2017

Drop In Dollar Could Open Exports

 |  By: Know Your Market

The strength in the U.S. Dollar Index has been a headwind in the dairy markets since 2015. The Dollar Index measures the value of the U.S. Dollar compared to a basket of currencies of significant U.S. trading partners. A higher U.S. Dollar requires foreign trading partners to pay more of their currency to purchase U.S. products and vice versa.

Since 2015, the Dollar has spent the majority of its time above 92 on the Index and priced many U.S. dairy products out of export opportunities. As a result of this and expansion in the U.S. dairy herd, inventories of dairy products ballooned and milk prices fell.

On Tuesday, the U.S. Dollar moved as low as 91.55, the lowest index value the dollar has seen since January 16, 2015. If this trend continues, and with a selloff in cheese recently, opportunities to move some inventory could be available.

CME spot dairy products had mixed results on Tuesday. Both cheddar blocks and butter dropped 3 ¾ cents; blocks closed at $1.52 ¾ per pound while butter settled at $2.55 ½. Barrels stopped the bleeding on Tuesday after a 27 ¼ cent fall over the past week. Barrels gained 1 ¼ cents and closed at $1.50 per pound. Nonfat dry milk was unchanged at 84 ½ cents.

Class III milk markets saw September drop 12 cents and the 4th quarter up 1 to 10 cents. 2018 declined in every month from a penny lower in January to 12 cents lower in April. Class IV markets were down 14 cents September through November with December unchanged.