March 5, 2021
Class III and IV Milk Move Higher
Price action this week continued in a positive manner for the dairy markets. While trade was choppy in the front half of the year the back half of the year traded steadily higher throughout the week. The third quarter of Class III started the week at $17.86 and finished the week at $18.26, while Q4 started the week out at $17.77 and finished the week at $18.03. Some of this positive long-term outlook of price in the market may be related to what has been happening recently in global prices. The Global Dairy Trade Auction saw its dairy index trade an impressive 15% higher in this week’s auction This is also the 8th consecutive up auction in a row for the GDT. The biggest movers in these auctions have continuously been butter and the powder markets, which should help Class IV move out of recently depressed levels as well.
A Global Dairy Trade Auction event this week saw the GDT Price Index soar 15%
US dairy prices are at a pretty strong discount to global levels – which should continue to drive export demand
US butter production was up 7% in January while US cheese production was up 5%
The second half of 2021 traded to the highest prices the contracts have ever traded this week
Corn Falls 2c This Week
The corn market had an up-and-down week of trade, ultimately losing 2c overall on a volatile week. Friday’s price action saw the May 2021 contract add 13c and post a weekly close of $5.4550 per bushel. There is no rain expected for Argentina next week. New highs in the crude oil market helped to offset a rising US Dollar over the past few sessions. The USDA will release its next Supply and Demand report this next Tuesday. Expect market conditions to be choppy leading into the report. Trade estimates for Brazil’s corn production is near 108.30 million metric tons, versus the USDA’s 109.0 figure. Argentina is expected at 47.0 million metric tons versus the USDA’s 47.50 figure. The market will watch to see what the USDA says the demand picture looks like as well.
Double crop planting is well underway in Brazil, but is behind the usual pace
The higher fuel market is supporting ethanol margins
There is no rain forecasted for Argentina next week
World corn stocks are expected to continue to tighten – the USDA will release another Supply and Demand report next Tuesday
Soybean Meal Drops For Third Week In A Row
Since peaking out for the move on January 13th, the soybean meal market has been quietly drifting back to the downside. The market still holds at elevated levels with May 2021 at $418.20 and December 2021 at $381.90. Chart technicals are pretty neutral as the daily trading range has remained pretty tight. This often could lead to a big push one way or another out of this trading range. As the market awaits a catalyst, one could come next week as the USDA will release its Supply and Demand report on Tuesday. Should the USDA tighten US and world soybean ending stocks, prices could break to the topside out of this range. However, if the USDA makes no changes, it could be viewed as bearish short term. 10% of Argentina’s soybeans are rated good to excellent with 70% rated as normal. Cargill Inc is expanding soybean processing capacity at 2 large crush plants.
Soybean Meal Highlights:
Soybean meal is holding up at elevated prices, but has slowly been working to the downside over the past few weeks
US and wold ending stocks look to continue to tighten further
Mixed weather in South America with wet conditions in Brazil and the opposite in Argentina is supporting prices
Just 10% of Argentina’s soybeans were rated good to excellent as of Thursday