Market Reports

The fundamentals of the milk powder market seem particularly healthy, and the bulls are roaming free.

After much volatility, the boundaries are becoming clearer. The spread between blocks and barrels narrowed, adding another layer of uncertainty to the already complex cheese markets.

After rocketing higher last week, CME spot Cheddar blocks continued to soar. But, the cheese markets are likely to remain volatile.

Though the bulls made headway, their progress was laborious. Each week they argued that tighter milk supplies and falling cheese inventories should lift prices. Now, the bulls are clearly in charge.

Football season has arrived, schools are back in session, and cheese demand is excellent. Output is not keeping pace. While Cheddar blocks score fresh multi-year highs, spot butter reached a milestone of a very different sort.

This weeks rise in cheese prices in an already lofty market are truly impressive. Last week’s Cold Storage report showed an astounding drawdown in cheese inventories, and the spot markets suggest that fresh supplies are tight.

Despite the rough week in the dairy pits, dairy product prices and Class III values in particular will soon find their footing.

The spot markets have been buoyed by robust near-term fundamentals. However, dairy futures were far from exuberant this week and some new clouds have moved onto the horizon.

The stock market suffered its worst losses of the year on Monday but the U.S. dairy markets remain firmly supported as milk tightens. On Monday, USDA will publish its much-anticipated Acreage and Crop Production reports. Next week could be volatile.

Although the bulls did not assert themselves this week, the bears are not in charge. Aside from the break from the extreme heat, all the factors that propelled the markets to their recent peak remain in play.