July 8, 2022
Milk Closes A Volatile Week Mixed
Class III and IV milk futures have pushed lower for about four weeks in a row now. This week’s trade was yet another volatile one, but the market did stabilize late in the week. The August second month class III contract was down 74c on Tuesday and fell another 24c on Wednesday. Buyers then supported and helped August recover 40c on Thursday. It then fell 9c on Friday, which put the contract down 67c in total for the week. The heavy selling pressure to start the week came from a lower Global Dairy Trade, a commodity-wide selloff, dairy spot market pressure, and technical weakness. The market broke below the May low, which may have also fueled additional selling pressure. The market trend has now turned from an uptrend to a downtrend.
An important macro fundamental to watch moving forward is going to be what the US dollar index does from here on out. The dollar was up roughly 180 points this week and hit another new 20-year high. The combination of this along with more recession talks has kept commodity prices on edge. The big thing to watch will be to see how much of an effect this high dollar has on our US dairy exports. Dairy exports surged throughout late 2021 and so far into 2022, but as global prices slip lower and the dollar keeps going up, that export demand could diminish. It was reported this week that May 2022 total US dairy exports were up 5% from last year, setting a new single month record.
Corn Buyers Support Late in the Week
– December 2022 corn futures were up 16c this week despite heavy selling pressure to start the week
– The market found support near the 200 day moving average and closed the week with three consecutive up days
– US corn crop ratings continue to fall as the USDA said 64% of the crop is rated good to excellent as of July 3, 2022
– The late week rally may have been linked to talks that China is buying US corn
– CONAB in Brazil increased their estimate of the country’s corn crop to 115.7 mmt versus 115.2 last month)
Soybean Meal Shrugs Off Commodity Market Weakness
– August soybean meal futures added another $9.20 per ton this week to $431.30
– The US weather forecast suggests rains this weekend but then maybe two weeks of warm/dry conditions for most of the Midwest
– The high US dollar and talks of a recession are keeping commodities on edge, but the soybean meal trade remains fairly strong
– China is considering $220 billion stimulus to help their economy