June 2, 2023
June Starts Like May Ended
- Milk futures continue down the path of least resistance lower with Class III leading the charge. July through October Class III contracts all fell greater than 30 cents on the day while Class IV was mixed with July and October unchanged and August and September down 10 and 9 cents, respectively.
- The spot markets offered no help but explain why Class IV has not fallen as quickly as Class III with butter up slightly and powder unchanged while both cheese and whey fell to lower prices.
- Regional cheese reports show hefty milk supplies despite a declining herd from March to April and minimal production growth in 2023 compared to last year.
- Next week is quiet on fundamentals besides a Global Dairy Trade event on Tuesday which will look to end a streak of two lower auctions from May.
Low prices have helped volume in the spot trade with cheese and whey but have not resulted in higher prices as sellers are taking lower bids to keep volume moving. Both whey and cheese hit multi-year lows last month and have not given any indication of higher prices coming as global dairy supplies are reportedly strong. Despite the decent demand in cheese being reflected in sales, inventories remain well above the 5 year average and grew from March to April. Processors are running full schedules with strong availability of milk and spot loads of milk are reportedly being outright rejected or bid anywhere from 4 to 12 dollars/cwt under class pricing. Milk production domestically has been kept in check with strong culling numbers as cattle prices today reached all time highs for the front month contract. The next strong area for support for the second month Class III futures contract appears to be just below $15/cwt, an area hit at the beginning of COVID.
Corn Prices Bounce off Lows
- In Friday’s trade alone, front month July prices bounced 28 cents off the low, gaining over 16 cents on the day and wiping away lower trades earlier in the week to finish 5 cents higher.
- Dryness remains the catalyst for higher prices as a high pressure system has kept moisture to a minimum with 34% of corn production areas in drought as of 5/30.
- Despite a strong bump from previous week, ethanol production is still down 6% from year ago levels, the pace is off from USDA’s corn usage forecast.
- Inspections and shipments remain well below levels from last year and USDA forecasts. USDA could lower its forecast in next Friday’s WASDE.
- Despite the pessimism around the current crop due to drought, USDA will likely be raising ending stocks on corn here in the US as usage and exports lag well behind previous forecasts.
Soybeans Make Multi-Week Jump
- Despite an attempt to work lower, soybeans bounced drastically off the weekly low to finish 15 cents higher. This week saw an 80 cent range on the front month July contract.
- Working adversely to beans, July meal closed lower for the 3rd straight week, down over $4 per ton. A drop of $35 per ton during the last three week selloff.
- Reports of 120k metric tons of beans from Brazil heading to the Southeast US surfaced this week and given the premium on domestic beans, these are likely not the last vessels headed this way.
- California’s Prop 12 was held up by the Supreme Court and major pork production groups see it pushing up the price of production with the possibility of pushing some pork growers out of the industry entirely.