6/6/2021
The buyers are back but will they push the spot price high enough to meet the futures prices? At the end of this week there were multiple bids in both blocks and barrels. This pushed barrels 2.25 cents higher but blocks still lost half a cent. The futures still have a premium to spot but the longer that spot stays in this range, the more likely NDPSR will come down to meet it. When I stick the current spot prices in the calculator I come out with a class 3 price of 16.24.
Spot Market Recap
Milk Production
Cheese market tone remains uncertain this week. With block under barrels there is a concern that the price of barrels will soon slide back down. Buyers are hesitant to take on extra loads. Retail demand is steady this week and grilling season has gotten under way. Food service is spotty with some reports of improved sales where other areas are reporting restaurant coolers are full. Most buyers are only buying for their immediate needs. Cheese production is busy with current milk supply. Spot prices are $5 to $6 under class. Cheese inventories are steady to growing as cheese makers add to hedge against fall demand. Overall the cheese market is steady with current prices.
Cream is available coming out of the holiday weekend. Although with summer coming on and ice cream manufacturing ramping up there is an expectation that cream will be harder to come by in the coming weeks. Inventories are available for the contract and spot needs and some manufactures are putting away extra inventory for fall needs. Retail demand remains soft but food service orders are strong and continuing to grow. Export interest has decreased a little bit. This week the butter price has ranged 1 to 8 cents above the market.
Dry Whey prices have held steady this week with domestic demand moving to the sidelines to wait for better prices. Export demand has held steady and most of the inventory is being sold to the international market. Port congestion is continuing to delay export orders. Dry whey prices have started to show some weakness as the price at the CME fell 5 cents this week.
Dairy markets are starting to show some weakness and prices on spot have dropped the last 2 weeks. With that said, with current prices, buyers should be more willing to step in and buy for future needs this week. I would look for spot to be steady to higher this next week. With that in mind I would look to buy some put spreads. Futures still have a large premium to cash and therefore they are still vulnerable to sliding. Look to buy 18.50 puts and sell 17.00 puts Aug – Dec of this year for 40 cents. Give us a call to get more specific recommendations.
