Archive for the ‘Dave Kurzawski’ Category

Chicago Prices Defy World Market Levels

August 15, 2014 — We’ll Have a $2 Cheese Market at Least Through the End of August. Incredible cash prices are being seen in Chicago and continue to defy world market levels, with block cheese up 6 cents Thursday to the highest level since April 28, and barrels up 3 1/2-cents. Butter came back to life this week with a vengeance, skyrocketing 16 cents Thursday, to $2.66 per pound, a new high for 2014 beating late July’s $2.62, and may pound on the door of the all time record of $2.81 in September 1998.

FC Stone dairy broker Dave Kurzawski said in Friday’s DairyLine that domestic demand for cheese and butter is still very strong and may continue for some time. “I don’t know FCstonewhere the top of these markets will be,” he admitted, “I don’t know if anybody can answer that question, but what has happened here is that there remains a strong demand for fat and demand for butter.” Cream demand remains strong as well, he said, although cream demand has ticked down a little but “nothing too worrisome from the standpoint of the market bulls.”

Cheese has “chopped sideways, around the $2 level for several months now,” Kurzawski explained, “And now we’re starting to break back to the upside and all the bearish news globally has yet to translate into anything here domestically and so from that standpoint, if there’s still tightness the market might have to go up into a price where they’ll bring some excess inventory to the exchange.” Things are stronger than most people expect, he said, and “No one knows how long it will last but I think we will have a $2 cheese market at least through the end of August.”

The “bearish” news would appear to be the threat of rising milk production and Kurzawski says globally there’s no doubt about that and things will be changing in that regard next year in Europe and there’s concern about good weather in Australia and New Zealand as the El Niño scare “loses its steam,” but “Domestically here we have yet to see any of these real high prices that producers are receiving really translate into much of a big milk production situation in 2014 and we’ll probably see about a 1 1/2 percent increase and that’s just not enough at this point in time,” he concluded.

Global Dairy Prices Weakening

August 1, 2014 – FC Stone dairy broker Dave Kurzawski discussed in Friday’s DairyLine broadcast,  this week’s announcement by New Zealand-based dairy cooperative Fonterra

Dave Kurzawski, FC Stone

Dave Kurzawski, FC Stone

that it has reduced its forecast Farmgate Milk Price for the 2014/15 season by $1. Chairman John Wilson said the lower forecast reflected continuing volatility, with the GlobalDairyTrade price index declining 16 per cent since the start of the season on June 1.

Kurzawski said it’s significant in the fact that it’s forecasting lower prices but he quickly added that Fonterra typically starts with a very conservative estimate and ratchets it up throughout the season “so you’re probably looking at a worst case scenario right now but it is reflective of what is going on in the world so it’s not something that should shock anybody, it’s reflective of weaker global prices.”

U.S. prices right now are among the best in the world, he said, and “The rest of the globe is paying less for dairy products.”    The U.S. Foreign Agricultural Service reports that quota imports of butter for the January to June 2014 period totaled 8.14 million pounds, up 73% from the same period in 2013. June 2014 quota imports of butter totaled 1.23 million pounds, up 89% from last June.

Kurzawski said these are quota imports and don’t concern him much but he is more concerned with “what’s on the horizon.” Quota imports are nontariff, according to Kurzawski, and the 8.14 million pounds represents about a day and a half’s production in the U.S. so it’s a small amount. He admits the percentage increase is big and may foreshadow what is to come but, “when you look at tariff-based imports, they are more telling as they represent a premium that exporters pay to get product out of their country and into the U.S. because of the price discrepancy.”

Kurzawski expects to see that happen over the next five to six months, starting from Europe and then New Zealand, in the Fourth Quarter, and we will likely see an uptick in non quota imports. “That will be more telling of potential downward pressure on U.S. fat prices,” he concluded.

We’re “Kinda Divorced” From World Market

July 18, 2014 — U.S. dairy product prices appear to amaze traders but clouds are appearing on the “price horizon.” Jerry Dryer’s recent Dairy and Food Market Analyst warned
that global milk production will overwhelm demand for the next five years, according to a recent analysis by Goldman Sachs.

We talked about those clouds in Friday’s DairyLine with FC Stone dairy broker, Dave Kurzawski. Kurzawski explained the jump in butter to a “tight market” and said cheese was

Dave Kurzawski, FC Stone

Dave Kurzawski, FC Stone

“acquiescing to that.” He explained that cream is very tight in the country as ice cream sales are good.

“We’re pretty much divorced from the world market,” Kurzawski stated, “But we are still alive and well on the butter market and probably aiming at that $2.50 (per pound) mark.”    Regarding the prediction on milk production, Kurzawski argued that it’s hard enough to look three or four months ahead as to what will happen to milk supply and demand but “They’re (Goldman Sachs) probably not too far off in the fact that we should expect more milk production in 2015 and probably more still in 2016. Without question, that’s the trend that we’re going to be on,” he said, “But right now I still think we’re going to be hovering around 1 1/2 percent for the balance of the year.”

Kurzawski doesn’t see any big moves in the U.S. milk supply but globally, New Zealand coming back strong and will come back strong in the new season “so we have to expect that but more than that is the demand out of China.”

Kurzawski said “It’s hard to believe when you see butter over $2.40 per pound and cheese over $2, at sustaining levels, so it’s easy to become complacent but reality is that China is currently overstocked on powder and anhydrous milkfat and that will eventually make its way through the global market chain and it’s going to come back to roost here in the U.S. with probably lower prices some time by the Fourth Quarter.”

No Crash in Cash Cheese or Butter

June 13, 2014 –  No crash in cash cheese or butter….That’s  the read of FC  Stone dairy broker Dave Kurzawski. Speaking in

Dave Kurzawski, FC Stone

Dave Kurzawski, FC Stone

Friday’s DairyLine, Kurzawski said the cheese  market seems more stable right now and he credited pipeline refilling as buyers  try to replenish supply from previous sales. But, he admits that we’re putting  more milk into the cheese vat right now and he sees that continuing for awhile  and more cheese will be made over the next 30-60 days than less. That will  result in continued pressure on spot prices, he warned, and he expects lows in  the $1.85-$1.90/lb. range.

Butter wise, Kurzawski says the market is tighter right now and he  pointed to strong ice cream sales as cream demand is strong. He doesn’t see much  downside for butter, in fact the “pricing skew,” he said, is directing milk out  of the churn and more into the vat as “manufacturers don’t want to make a ton of  excess butter at these price levels.” He looks for “inflated butter prices” for  at least the next 30-45 days.

DairyBusiness Update editor Lee Mielke asked him how he, as a long time dairy broker, views the Farm Bill’s  new safety net for dairy farmers, the “Margin Protection Program.” Do you, in  any way, see it as a threat or competition to using dairy options and futures  for risk management?

He admitted that there’s a lot of talk of that potentially cannibalizing some of the sell side interest on the futures and options market but he doesn’t quite agree. He called the program “a good tool, a progressive tool as far as from a government perspective, a government program that has been put out.” He said it’s a “real advancement in that sense,” but believes it will be used to “augment a producer’s risk management plan, not replace it.”

Cheese Could Lose Another 5-10 Cents/Butter Will Stay Lofty

May 15, 2014 — The cash block cheese price fell below $2/lb. this week, first time since December 19, 2013, and now even butter may get caught up in the down draft. After reaching

Dave Kurzawski, FC Stone

Dave Kurzawski, FC Stone

the highest level since May 2011, butter dropped Wednesday but was unchanged Thursday. What’s behind the fall and how low will prices go?

FC Stone dairy broker Dave Kurzawski, said in Friday’s DairyLine that the market is “Still trying to figure itself out or trying to fix some of the problems that we had earlier in the “Demand has dropped,” he said, “Courtesy in part to weaker prices internationally and it’s starting to spread into the U.S. market.” “That’s the concern, going forward,” he said, although he still believes there’s “good underpinning demand that we have to work through.”

How low will cheese prices go? Kurzawski looks for “equilibrium within the next 5 to 10 cents to the downside potentially.” “But, as we get into the hot weather in the next 30-60 days, that will become more of the talk of the town and if that happens it’s going to be hard for this market to fall off a tremendous amount from where we currently are.”           Kurzawski doesn’t see a whole lot more down side for the short term, in other words the next several months, “but as we go into the latter part of the year, depending on how New Zealand and Australia start back up their season and how European milk production and sales go, things could slow down more as we close out 2014.”

Will ice cream sales prop up the butter price? Kurzawski said ice cream sales have been really strong so far this year and has been a good boom for butterfat demand. He said a lot of people were caught off guard coming out of the Easter holiday expecting to see cream demand drop off but that hasn’t happened yet.

“And, since we haven’t seen a real heavy flush of milk production in the Midwest, the Upper Midwest in particular, it remains to be seen if that milk goes into butter production or cream production. Going forward, butter prices in particular, are going to stay lofty for longer than I think people can see at this point,” he concluded.

Was it a Late “April Fools” Thursday at the CME?

April 4, 2014 — The Global Dairy Trade (GDT) auction has dropped three sessions in a row and product prices have plummeted. GDT Cheddar, for example,  on Tuesday finished at

Dave Kurzawski, FC Stone

Dave Kurzawski, FC Stone

$2.0130 per pound, while the CME price, Thursday, jumped 3.75 cents, to $2.4225, almost 41 cents above the GDT price and remains the highest priced cheese in the world. Was this a delayed April Fool’s?    FC Stone dairy broker Dave Kurzawski, speaking in Friday’s DairyLine, said it certainly seems that way. The CME block market is a “fresh block market, a young cheese between 4 and 30 days old” Kurzawski explained. “It’s a small sliver of what’s really going on and that market still seems to be very tight.”    That said, Kurzawski  expects to see some pushback, both domestically and internationally, plus, he warned that having the world’s highest priced cheese has “put a target on our back” and could potentially attract cheese imports. He adds that barrels are “sluggish” but “a bid could come along just to tighten up the spread,” which is now at  19.25 cents.

When asked how significant the GDT auction is, as some suggest it’s too thinly traded to give much credence to, Kurzawski shot back, “We don’t have a global price index outside of the GDT. That’s our best guess for what’s happening globally.”  “You can say what you want about the liquidity on it but, at the end of the day we are looking at the best price discovery mechanism that we have for a global dairy price.”

When asked about butter and powder, Kurzawski pointed out that “powder led the Class III up and powder led the whole dairy complex up but you’re starting to see real weakness on the GDT which was down  in both those areas.” Butter was down 11%, he said, skim milk powder was down 9.6%, and whole milk powder was off 8.6%.

“These are some big numbers and the GDT was down 4%, two events ago, then 5.2% in the next event, and down 8.9% on Tuesday. The market is trending lower,” he said. “That doesn’t mean it will always trend lower but it does mean that we have to find a price where buyers are willing to come back in.”

He views the GDT as “the canary in the coal mine” for U.S. prices and he believes U.S. prices will ultimately follow “to some degree.” However, he does not see block cheese plunging to $1.70 but suggests “They’ll come down at some point, perhaps $2, $1.90, or $1.95.”

How Low Will Cheese Prices Go?

Dave Kurzawski, FC Stone

Dave Kurzawski, FC Stone

February 14, 2014 — Cash cheese prices set new record highs at the end of January but plunged last week, although they’re still unseasonably high and still above $2 per pound.

On Friday’s DairyLine, Lee Mielke asked FC Stone dairy broker Dave Kurzawski how low they would go. Kurzawski said there are two camps out there, one that believes we’re settling into a stabilized price at $2.1050 per pound on the blocks and $2.06-$2.07 on the barrels.
The other camp believes that the market clearing price is somewhere below $2, perhaps $1.90 or $1.85 per pound and the split between the camps is 50/50.

He thinks there is cheese that is coming to the CME but there’ll be buyers stepping in although end users are still in a “wait and see mode.”
Export prospects for 2014 are still good, according to Kurzawski, but will “ebb and flow like any other year.”

“We’ve spent the better part of 8 to 12 months looking at burgeoning export prospects,” he explained, “And they will ebb and flow and if that’s so we could be at a period now where things start to slow down as milk production comes on, pretty strong out there in Europe.

He adds that there’s a “very competitive atmosphere” right now on butter and cheese out of Europe where “they’re taking some of our business.” As that happens, he warns that “our price has to adjust to be competitive.”

As to his read on butter overall, salted butter in the U.S. is largely tight, he said, but exports have slowed some. He said we may be entering a period now of “quiet trading, sideways, in the mid $1.70s” until we get to the Easter holiday.

Hot Cheese Market Takes a Breather

FCstoneJanuary 10 — The  cash cheese markets have been quiet the past couple of days - after some impressive gains earlier in the week. FC Stone’s Dave Kurzawski shares his insight with DairyBusiness Update’s Lee Mielke.

 

 

Whey Price Dip is Substantial

December 13, 2013 — FC dairy broker Dave Kurzawski said on this morning’s DairyLine that the large spread between block and barrel cheese will eventually come back in line and “the pattern the past several months is that when the spread gets out of whack the barrels rise to meet the blocks and that patterns seems to still be in people’s minds as we enter the second half of December.”

The big issue Thursday was the future’s response to the cash bidding. The response was relatively negative, he said, steady to about 8 cents lower. Class IV, nonfat, and butter futures were down as well, he said, and indications to him are that this is a short-lived scenario we’re seeing.

When asked if the failure to pass a Farm Bill was having any effect on the markets, Kurzawski replied, “Not really. The market hasn’t focused on the fact that Congress can’t get it together,” and commenting on Land-O-Lakes joining the Global Dairy Trade auction, Kurzawski said it was a “step in the right direction.” He believes there’s going to be more and more of the large U.S. dairy based processors getting involved with global export and certainly global pricing.”

The 3.4¢ fall in the AMS-surveyed dry whey price is also weighing on trader’s minds, according to Kurzawski. “The questions are coming fast and furious as to why this is going on,” he said, but he is also hearing that dry whey has been trading slightly below the AMS prices anyway. “It is a substantial drop,” he said, “And we’re not sure why that is but there’s been talk that there’s some supply out there that’s starting to make its way to the market.”

Domestic Cheese Prices Strengthen

August 27, 2013 –  Cheese prices at the Chicago Mercantile Exchange have seen a correction after taking a dive early last week. FC Stone’s Dave DaveKurzawskiKurzawski joined us on Tuesday’s DairyLine to discuss.

“When we were south of $1.70 that seemed to be a little too cheap relative to the world prices,” he said. “There’s no question there is product available on the fat side.”

We are seeing some large inventories to work through for both for butter and cheese, he said.

“Also, we have ho-hum milk production growth right now pegged against international demand that is more robust than domestic demand has been for the month of August, which is pretty typical.”

Domestic demand for U.S. product really starts to pick up past the Labor Day Holiday, so Kurzawski cheese prices to strengthen back up to the mid $1.70’s or low $1.80’s as we move into the month of September.

He’s also keeping an eye on the grain markets after the recent heat dome over the Midwest.

“There is some question whether that’s going to hamper the bean market, more so than corn,” he said. “With the Pro Farmer tour underway and trimming estimates from July on already corn and beans, I think that lends support to the 2014 contracts for milk.”

He says for producers looking to hedge, – “Certainly let the market come up a little bit as we get into the holiday demand time frame,” he concluded.

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