Big swings in the grains over lower exports and wetter cooler forecasts. Not a lot of movement in class 3, but down ward pressure is building as more cheese is available for the spot market. The key word this week in the dairy markets is steady. Steady supply of milk for manufacturing across the board and steady demand coming out of food service.
Spot Market Recap
In the Northeast, things are definitely running steadily. With strong milk output running into cheese production, most cheese makers are running full schedules. Cheese inventories are stable, with food service demand stabilizing and retail sales stable. A wide variety of cheese is heading out the door as grilling season is in full swing and summer gatherings are happening. Overall the Northeast cheese market is stable. In the Midwest it is hot and dry with reports that hay is needing to be shipped in to many dairies. Milk production has not backed off at all as there is more than enough milk running into cheese vats to run full schedules. Spot milk discounts are getting steeper as most manufacturing in the area is full and the bottling plants have slowed with schools out for summer break. On the West coast, cheese demand in both retail and food service is steady. Export demand has picked up with the fall of cheese prices. Cheese makers are running full schedules and milk is available. Blocks are available for spot purchases, while barrels are reportedly tight. Overall market tone on the west coast is steady to slightly bullish.
Butter market this week is stable. In the east region, butter makers are working through solid cream supplies. Butter inventories are stable to building. Retail market has slowed but the food service demand has steadied as the pipelines restock. Cream supplies are plentiful in the central region with production schedules remaining active. Retail demand has slowed but food service is better than expected. In the Western region cream is available but delivery problems have restricted production. Bulk inventories are available, and plant managers are building inventories to meet needs in the fall. Over all the butter market is stable.
Dry Whey prices moved higher this week as supplies are tight. However there is a growing hesitation from customers to take on product at 60 + cent prices. Production schedules are strong as discount milk flows into cheese vats. Export demand remains high which is pushing the price and keeping stocks tight. Over all Dry Whey market is strong.
Soybean 4 hr. chart below
Dairy markets this week are stabilizing on continued demand from food service and export. Milk is plentiful for all manufacturing needs. The west coast is having transportation problems which is slowing up processing schedules in that region. I would look to put spreads as futures could slump lower in the next couple of months. Grain prices have made cost of production skyrocket in the last few months but the recent weakness in the grain market could bring costs back down which would make $17 and $18 milk profitable. Technically the dairy market is moving in a bearish direction and when the graph points down you should be selling or buying puts. I like put spreads to capture the next $1 to $1.5 as futures move lower. I would also be buying back sold calls as the volatility has gone out of the market and options should be getting cheaper. As always give us a call and we can design a more tailored hedge plan for your dairy.