This Week In Dairy 08-13-2021

August 13, 2021

 

Dairy Finishes the Week Strong

The dairy market has seen a choppy yet bullish week in terms of price action as the Class III 2nd month contract finished $1.10/cwt higher than the previous week. Class III is the market taking the lead though as Class IV has remained relatively stagnant on the week. The biggest catalyst to the higher price action for Class III has been in relation to higher cheese prices in the spot cheese market. To finish out the week the Spot cheese market finished out a whopping 15.875 cents higher. With the market closing at $1.63125/lb the next technical upside objective is the July high of $1.70/lb. One potential factor that could push the cheese market substantially higher is the current spread between blocks and barrels. Barrels are substantially underpriced in comparison to blocks and if they start to catch ground on blocks the market could rally quickly.
Going forward we are still in the seasonal time frame that could support a slightly higher trend in prices. The fact that feed prices are remaining high after the release of the USDA’s WASDE report yesterday may start to pinch producers that are running out of feed contracts as we get into the awkward time frame between summer and harvest. Milk production has continued to stay strong over the last 6 months but higher feed prices could help slow down this production growth. We won’t receive the next update from the USDA until August 22nd. Next week is a fairly quiet week with only the Global Dairy Trade auction showing up as a major update for the market.

Milk Highlights:

The cheese market rebounded this week, spurring a recovery in class III milk futures

The September 2021 class III milk futures contract nearly finished limit higher two days this week. Volatility is still high

June Exports for dairy were once again a record for the respective month of June, up 4% YoY

Milk cows on farm fell 1,000 head from May to June. This is the first decline month-over-month in a year

 

Corn Gains 13.25c This Week

Corn futures worked higher for the second week in a row, supported by a friendly USDA Supply and Demand report on Thursday. The report showed that corn yield as of August is expected at 174.60 bushels per acre versus the July estimate of 179.50. The market reacted favorably to the USDA report on Thursday by initially jumping over 30c higher, but that move higher fizzled out by the end of the session and the market closed up just 14c. Today, focus was on the fact that there is a chance for moderate rain in the western Corn Belt in the coming days. Day four of the DTN yield tour has Illinois yield pegged at 203.50, Indiana at 190, and Ohio at 187. The coronavirus delta variant is also a concern for demand moving forward. This week, September corn added 13.25c and closed up at $5.6825 per bushel.

Soybean Meal Consolidates

The soybean meal market has traded in tight daily ranges for a few weeks now, and that continued this week. The September ’21 soybean meal futures contract added just $1.80 per ton this week, closing at $357.60. The USDA pegged 2021 soybean yield at 50 bushels per acre on the August WASDE report. This is down from the July estimate of 50.80 bushels per acre. The fact that US old crop ending stocks for soybeans jumped from 135 mb to 160 mb is concerning. There may be some uncertainty around final ending stocks numbers until the release of the September 30th report. On the bright side for the soybean complex, there have been 6 days in a row of export sales. Today there was an export sale of 326,000 metric tons to unknown and 126,000 metric tons to China.

 

Today’s Market Quotes

Author

Evan Disher

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