7/8/2022
Big crash for all commodities the last few week as traders went to the side lines on concern that the global economy is slowing down do to inflation. The trigger word this week was demand destruction. This led to $1.80 drop on soybeans, $1.60 drop in corn, and a $3 drop in class 3 in the last three weeks. Commodity prices have returned to their pre-war level. Although on the supply side we still are not going to see much in exports for grain and fuel coming out of the Russian and Ukrainian areas; therefore, the market seems a little over done for this trader and might justify the rally we saw on Friday on grains.
Weekly Spot Prices
Weekly Future Prices
Cheese: In the Northeast and West milk is available for processing, but some cheesemakers say holiday down time, labor shortages, and supply chain issues are having a negative impact on production. Meanwhile in the Midwest, cheese makers are concerned with some farmers downsizing and milk haulers leaving the business. Spot loads of milk continue to trade as low as $6 under Class in the Midwest. According to producers in the Midwest, spot inventories of cheese are in balance with demand. Spot purchasers in the Northeast and West say cheese inventories are available. Domestic demand is softening in these regions, though contacts report strong export demand. (USDA Cheese Highlights)
Butter: Across the country cream is available, though Central contacts report seasonally declining butterfat components. Butter makers are running busy schedules in the Central and West regions, though Northeast butter production is steady to lower. Demand for butter is declining from both food service and retail markets in the Northeast and West. Some Central region contacts are growing increasingly concerned that high gas and grocery prices will cause customers to reduce their butter purchasing or switch to lower priced alternatives. Spot inventories of butter are mixed in the Northeast, but tight in the West. Across all regions, bulk butter overages range from 2 to 16 cents above market. (USDA Butter Highlights)
Dry whey: The bottom of the dry whey price range moved higher, while the top of the range and both ends of the mostly price series slid lower this week. International demand for dry whey is steady to lower; contacts say exports to Asian countries are down in comparison to last year. Domestic demand for dry whey is steady and spot inventories are available. Liquid whey is available for production as cheesemakers continue to run busy production schedules. Despite this, dry whey production is limited as higher whey protein concentrates and permeates remain the focus of many regional production schedules. (USDA Dry Whey updates)
Is the bottom in, or was this just a dead cat bounce? This week we saw continued sell off in the beginning of the week, with a rally at the end. This is for all commodities not just milk and the sell off started a couple of weeks ago. As reports of recession and demand destruction from inflation run a muck the markets dropped. Finally with the jobs report being better then expected, the bears took a break and the markets rebounded a little. I am of the opinion that there is a middle ground between the bulls and the bears. There has been some demand destruction because of inflation as most people have experienced with every time they fill up there car or buy groceries. It has made me think twice about taking that extra trip out of town for a fun day out. Instead opting for an activity closer to home. As more people make similar choices, this should add up to lower demand and bring prices down. On the other side we have a record unemployment rate and continue to add jobs. So as prices come down consumers should have money to resume buying. With that in mind I would keep a close eye on the market this week and if we push lower look to buy calls or calls spreads to set up for a rebound in prices. Give us a call if you have questions on the market and we can design a hedge plan for your operation. There will not be a report next week, so look for the next one in two weeks.
