August 27, 2020

Selling Pressure Enters The Class III Space

 |  By: Know Your Market

Class III milk prices rose in the overnight and morning sessions prior to the CME spot dairy auction.  Cheddar block and barrel results ended with good volumes trading in both markets.  Blocks ended at $1.8650, down ¾ of a cent.  Barrels gained ¼ cent and settled at $1.44/lb.  Butter continued its recent high-volume trade moving 17 loads from seller to buyer while losing 3.25 cents and finishing at $1.4675/lb.  Whey closed at $0.3350, up a ½ cent.  Non-fat dry milk did the opposite and fell ½ cent to $1.015.  


Selling pressure entered the Class III space following spot cheese trade.  It seems as if the market is looking for further verification of dairy finding favor following the announcement of an additional $1 billion going into the Farmer to Family Food Box program.  Ultimately, details beyond the announcement remain vague.  Cash settled cheese futures have also built carry into the fourth quarter of 2020.  Some of that carry premium was removed today as October declined 2.25 cents/lb and November/December dropped 3.50 cents/lb, respectively.  Class III weakened 27 cents in September, 16 in October, 27 in November, and 33 in December.  January also lost 26 cents while the remaining months in 2021 were down single digits.  Class IV markets were mainly unchanged.


Grain prices rose once again as weather, exports, and managed money continues to drive the market.  Hot and dry weather throughout August has caused concern regarding the 2020 crop.  The U.S. drought monitor shows the entire state of Iowa as at a minimum of “abnormally dry” or worse.  Northern Illinois/Indiana also shows dry spots with southern Michigan showing up this week too.  Exports were either within expectations or exceeded them this morning.  Flash sales of corn to China helped run December corn 4.25 cents/bu higher on the day to $3.585/bu.  Soybeans took out resistance and ended 17.75 cents higher at $9.42/bu.  The wheat complex gained 7-11 cents/cwt as well.