August 26, 2022
Dairy Markets Reverse Higher This Week
Buyers have returned to the dairy markets and are pushing contracts higher off of recent lows. Several further out Class III contracts have closed over the 50-day moving averages, while some of the late 2023 contracts finished the week at new all-time buys. There seems to be a strong influx of capital working its way back into commodities at this time, with grains, dairy, and fuel all rallying higher. This week’s trade saw December Class III add $1.15 to a $21.75 close, while December Class IV added $1.77 to $23.10. A bullish factor driving prices higher is the fact that spot butter hit new multi-year highs on Friday, closing at $3.0825/lb. Butter demand is high, while inventories stay about 20% below a year ago. A slightly bullish milk production report on Monday fueled buying support throughout the week.
- Spot butter’s close on Friday at $3.0825/lb was its highest finish since 2015
- There should still be some caution in the market as cheese inventories are at record levels while the spot market holds about 30c over last year’s low
- The corn and soybean meal trade have been relentless with buyers scooping up any dips; the market isn’t seeing seasonal downward pressure at this point with crop ratings still weakening
- The Class IV market has recovered most of what was lost since the June peak
Corn Breaks Above Recent Highs
- The Federal Reserve meetings appear to have sparked managed money movement from stocks to commodities with today’s trade ending with S&P 500 and Dow down over 2%, and the Nasdaq down over 3%, while corn, beans, and wheat all saw double-digit gains
- Front-month December corn futures gained over 14 cents per bushel on Friday’s trade, now well above the 13, 50, and 200-day moving averages, and up over 30 cents overall on the week, settling at $6.64/bu
- Crop tours kicked off at the beginning of the week, Pro Farmer’s tour pegged the corn yield at 168.1 bu/acre, while the USDA estimate last month was 175.4 bu/acre
- China’s massive heatwave and drought conditions were reported to not be impacting their corn and soybean growing regions, mainly wheat acres being stressed
Soybean Meal Bounces Back as Beans Strengthen
- Front-month October soybean meal futures finished the week with double-digit gains of $15.40/ton to settle at $434.10/ton on the strength of new crop beans seeing double-digit gains as well
- Pro Farmer crop tour pegs soybean yield at 51.7 bu/acre while last month’s USDA figure was 51.9 bu/acre, reported pod counts are down slightly but still in the sweet spot for good production
- Bean exports reported for the week of 8/18 were slightly down from the previous week but nearly triple those of this time last year, reported over 686k metric tons
- Global rapeseed (canola) production is forecast higher, primarily based on a significant recovery in Canada
- Local scheduled and unexpected downtimes at processors in the Midwest have sent meal basis offers into wild ranges for nearby deliveries
Friday’s Market Quotes
Author
Michael Minster