This Week In Dairy 04-28-2023

April 28, 2023

 



Class III and IV Futures in the Red

  • Weekly losses were found in all 2023 Class III and Class IV futures contracts; second month Class III futures rebounded off of lows but still settled 49c lower on the week.
  • Active selling in the spot trades continued this week for whey and cheese, which each seeing 30+ loads traded, despite the volume, both lost 1c per pound.
  • Active cow culling may help alleviate the spring flush with a 10.1% growth, year-over-year, for the week ending 4/15.
  • The USDA revised the 2021 and 2022 total cheese production up by over 173.5 million pounds.

Two fundamentals for the dairy sector this week brought mixed news.  For the 8th straight year butterfat levels have set a new national record.  The 2022 federal orders pool average came in at 4.08%, up from 4.01% in 2021.  The other fundamental news out this week was Tuesday’s cold storage report.  The most recent release showed YoY gains of butter inventory and lower inventories of cheese.  Despite the gains and losses in inventories, the current total cheese inventory is well above the 5 year average while butter sits below its 5 year average.  The second month Class III contract not being able to recover above a multi year trendline points to possible lower milk prices in the near term as processors are flush with milk and already running near full production.  Q3 and Q4 averages fell 46c and 31c in the Class III markets while Class IV fell 9c and 13c, respectively.

 


 

Corn Gaps Lower and Continues Down

  • The front month corn contract rolled from May to July and created a large gap on the chart lower and followed by heavy selling pressure, creating a dollar range on the front month contract over the last week.
  • Expectations for a huge South American crop are being felt domestically in both price and large cancellations of expensive US corn contracts by China.
  • Funds have been teetering back and from between net long and short positions recently, ending this week in a net short corn position.
  • Expectations are the Black Sea grain agreement will expire without renewal as Russia’s demands are unlikely to be met.
  • Ethanol production slipped from previous weeks and was up only slightly from year ago levels, however, the Biden administration will suspend a federal rule preventing the sale of higher ethanol blend gasoline this summer as his administration tries to tamp down prices at the pump that have spiked during Russia’s war with Ukraine.


Meal Breaks Sharply Lower, Finds Friday Support

  • Friday’s trade reversed the lower course meal was headed since last week but the front month contract still closed at its lowest level this calendar year.
  • Support levels from previous lows were broken as the whole bean complex fell this week on quickly advancing US planting pace and China’s expected commitment to Brazil’s harvest.
  • 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.
  • Canola processing rose 24.7% in March from a year ago, according to Statistics Canada data released Thursday on agency’s website, acres are also expected to rise for canola this planting season.
  • ADM confirmed that the company’s soybean crushing facility in Spiritwood, North Dakota, is scheduled to come online in time for the 2023 harvest with capacity to process 150,000 bushels per day.


 

Friday’s Market Quotes

Author

Michael Minster

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