Another tough week for Class 3 as the buyers stepped to the side lines and let the futures sink back below the $20 level in the front months. This is also the first week NDPSR has priced below $20 for Class 3 this year. This coming Monday we have both Milk Production and Cold storage. If both reports lean one way, we could see a big price swing as this market tries to find a direction.
Weekly Spot Prices
Weekly Future Prices
Cheese: Milk production is declining but milk volumes remain available for cheese making across all regions. In the Northeast and West, cheesemakers are running busy production schedules. Some production facilities in both regions are running below capacity due to labor shortages. In the Central region, cheesemakers say more milk is available than typically expected at this time of the year due to some expected and unexpected down time at production facilities. Cheese inventories of both blocks and barrels are available for spot purchasing in the Northeast and West, though barrel inventories are snug in the Central region. Market prices for cheese have declined in recent weeks, contributing to an uptick in demand from customers in both domestic and international markets. Contacts in the Central region say market prices of $2 may be a price barrier, as they feel that may be more than purchasers are willing to pay. (USDA Cheese Highlights)
Butter: In the Northeast, cream multiples are pushing higher amid strong demand. Higher multiples have enticed some butter makers to sell cream loads, constraining butter production. Cream availability is tight in the central and West regions. Tight cream supplies have contributed to increased micro-fixing rates in the Central region. Ice cream makers in the West are purchasing loads of cream to run steady production schedules. Western butter makers are running busy production schedules, though some say limited tanker availability has contributed to unplanned down time. Retail and food service demand are trending higher in the West, amid Labor Day and back to school sales. Steady demand is present in the Northeast. Contacts in the central region say food service and retail customers are purchasing hand-to-mouth. Some stakeholders in the region say this may contribute to higher butter prices in the coming months. Butter inventories are available in the West, but tighter in the Northeast. (USDA Butter Highlights)
Dry whey: The bottom of the dry whey price range moved higher, while the top moved lower. The mostly price series saw upward movement at the top and the bottom was unchanged. Contacts report an uptick in domestic demand as some spot purchasers seem content with current spot prices. Meanwhile, international demand for dry whey is unchanged. Stakeholders say purchasers in Asian markets have not reentered the market and dry whey exports are down from last year. Spot purchasers say dry whey inventories are available. Dry whey production is unchanged this week. Some drying operations are operating below capacity due to labor shortages and delayed deliveries of production supplies. Plant managers say they continue to focus their schedules on higher whey protein concentrates and permeate. (USDA Dry Whey updates)
Class 3 September 1 hour chart
Class 3 futures fell this week with a price drop over a dollar on some of the front months. With both cold storage and milk production out on Monday this could be a highly volatile week. If the reports come out bearish we could see further price drops sending producers into the red for the next couple of months. If the production is down and cold storage is tightening up. Prices will push past last weeks highs. I am going to bet on the latter and recommend buying call before the reports on Monday. Look to buy 21.50 calls and sell at 21.60 as we look to continue the stair steps higher on the hour chart.