After a week of giving up ground on class 3 is there another rally instore? If we rewind two weeks most predictions were for higher going into this summer with at pull back in July or August. Sense then we have dropped giving up 2 cents on cheese last week and now another 14 cents this week. With good food service and export demand I would expect spot class 3 to show some support this week.
Spot Market Recap
Cheese producers are running at active production schedules as there is plenty of milk for cheese production as spring flush continues. Spot prices for milk loads are reported at even to $1.50 under class. With further restrictions on covid easing food service demand has continued to increase. However, retail demand is mixed. As the country gets ready for grilling season cheese continues to move at the retail level but as more people eat a restaurants the overall demand has backed off some. Export demand has been good and with this weeks price drops it should increase. With that said inventories are growing and cheese is becoming more available.
In butter, cream supplies are available in the Northeast and West. The Central butter markers are sourcing cream supplies from the West and South. Production schedules and running a full capacity and manufacturers are preparing for fall demand needs. Inventories are stable and loads are available for spot demand. Retail orders are lower and food service demand has been mixed. Bulk prices are running 1.0 to 8.0 cents above the market this week. Overall tone for the butter market is stable.
Dry Whey prices have shifted lower this week at the top of the range. The low $0.60 has found some support. Production rates are steady and inventory is tight. Though trading has slowed. China has been trying to rebuild its hog population and with the number of piglets to hogs it looks like they still have some way to go. This requires a lot of whey so I would expect the export market to stay strong. The whey market is stable at this time.
On Grains the weekly technical action in the December corn market is positive for a price recovery. The corn price, December Futures, has the possibilities for above 6 dollars run on weather this summer. Brazil port workers are planning another strike, the Brazilian corn crop continues to disappoint and China continues to buy. We need a near record crop to keep away from a tight corn market situation.
Consider buying the 6.00 December corn call 38.0 cents. hold this through the July weather rally.
For Soybean Meal needs buy December meal below $400 to hedge some feed needs through the summer.
Look for a recovery this next week in class 3 as the cash market has dropped to better levels for exports and fill fall demand. If there is a good run higher I would consider selling or looking at put spreads. If the market runs lower I would look to cover 4th quarter sold positions or buy call to sell into on the next rally. With the volatility we are having this year there are some good opportunities to get hedges on but you need to have a large hedge account to hold onto those positions. If you are looking for a more specific recommendation give us a call.