April 21, 2023
Spot Volume Supports Milk Prices
- Despite the second month and Q2 Class III contracts lowering this week, Q3 and Q4 for Class III, and Q2 through Q4 for Class IV were higher.
- Heavy trading in the spot markets seem to have supported milk prices and raised spot prices, cheese, butter, and powder were all gained value, while whey traded sideways.
- Another positive fundamental on the markets this week was a higher Global Dairy Trade Index, ending a recent slide of negative events.
- Active culling of the dairy herd also seems supportive of keeping gains in milk production stable, where March milk production only grew 0.50%.
The heavy volume in the spot markets were led by cheese, where 114 total loads were traded this week! Nearly three-quarters of the cheese loads traded were barrels and set the highest weekly volume for barrels since 6/23/2018. The activity brought higher prices by the end of the week with the closing price of spot cheese on Friday just over $1.65/lb, ending a months-long skid of lower prices. With advantageous cattle prices sticking around, cull rates have continued growing within the dairy herd with a 1.3% weekly growth year over year. Regional cheese reports show full production schedules keeping us with milk supplies both domestically and abroad, while domestic demand for cheese is strong with mixed demand abroad. Next week we will have an updated Cold Storage report while many eyes will start focusing heavily on Crop Progress and conditions throughout the world.
Nearby Corn Supported By Reports
- May corn has been under recent selling pressure but has continued to stay above the 100-day moving average while also not being able to break out above the December 30th high.
- Conditions for corn continue to be favorable in main growing regions of Brazil, while drier forecasts for the Midwest point towards good planting progress.
- Total corn export commitments are down 33% from year-ago levels despite the surge in sales from China a month ago.
- Argentina corn conditions have been more favorable to the struggle that Argy soybean crops.
- The May/December spread on corn has grown to over $1 per bushel these last few weeks as the market anticipates a growth in ending stocks for 2023-24.
Meal Begins to Turn Over but Faces Resistance Ahead
- Brazilian soybean prices have dropped dramatically as low storage availability in country forces producers to sell off the field, prices have dropped around $2.00 for May delivery.
- Possible support for meal will likely be in the January 5 and December 19 lows of 447.10 and 437.20, respectively, closes below those values could indicate a significant move lower.
- The drop on Brazilian bean prices has made US beans even less attractive; US exports to China in March were strong but many expect that demand to shift to Brazil.
- Soybean crush in March was the second highest recorded volume behind only December 2021. Crush was up 12.3% from February and 1.8% up from year-ago levels.
- Cuts continue to be made to the Argentina soy crop where local agencies put the crop between 22 and 24 MMT, well below the USDA estimate of 27 MMT on April 11.
- China’s importing of pork is on the rise but puts questions into how much meal the country will need for its domestic pig herd.
Friday’s Market Quotes
Author
Michael Minster