Archive for the ‘Dave Kurzawski’ Category

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.

Listen to Podcast:

CME Cheese Priced Out of the Market

(August 21, 2012) USDA’s July milk production came in “more bearish than expectations,” according to Dave Kurzawski, FC Stone dairy broker. “I think the wide variety of market participants were looking for a negative number when actually it came in at 0.8%,” he said.  

He said the seeds were already sown for declining cheese prices prior to the milk production report as prices have been priced out of the market. Recent cheese prices have been ranging from $1.80 to $1.90, and Kurzawski said, “that really priced us out of the market from an export perspective, and the summer doldrums has put demand domestically lower, and any export business that we hoped to have, we kind of shut the door on that when we got over $1.80.” 

Also, just because feed prices are up, doesn’t necessarily mean the cheese or milk price is going to follow. Kurzawsk said we have to weigh the supply versus the demand. And demand is pretty quiet, but he doesn’t expect to see a big drop in the cheese price, although it could be pushed back down into the $1.70’s . “At that point you start to see the buyers step out of the woodwork and try to get some cheese coverage.” 

As far as Class III is concerned, you have a pull back that is now starting, a corrective pullback that doesn’t necessarily mean that the “on farm economics are repaired or there’s anything that is real bearish out there from that standpoint.” 

Don’t expect the Class III price to go up just because we are in a bull market. There will be periods of setbacks, and Kurzawski believes we are in one of those periods right now.

“The reality is, we have gone from $14 in May to $20 in the middle of August for Class III futures, and there ought to be some kind of correction here to the downside.” 

“The weather has been baked-in, but what has not been baked-in is the poor on dairy farm economics, and that’s something we are going to have to be wrestling with not for another 30 to 45 days but probably the next 3-6 months, and maybe longer ” he said.

Cheese Market: Buy The Rumor, Sell The Facts

(June 21, 2012) It’s been a roller coaster ride for CME block cheese the past couple of weeks. The blocks were trading at $1.70 last week but then dropped to $1.6250, a quarter-cent below the barrels as of June 21.

“Maybe it’s buy the rumor, sell the facts scenario,” FC Stone dairy broker Dave Kurzawski told DairyLine. “The rumor being…there’s been a real worry for some milk supply to slow up here as we go forward.”

He cited good first half reports of export demand that could have attributed to the rise in prices. “The first part of the year, demand wasn’t expected to be quite as strong as it has turned out to be for cheese.”

The $1.70 mark appears to be the threshold for block cheese. “I think that’s where people start saying this is going to shut off exports that we do have,” he said. “This is going to slow things down because we do have cheese available, there is some fresh product out there and so we saw that start to come to market last week.”

Butter and cheese performed stronger than expected recently, but Kurzawski believes we are probably running out of steam on both. Although the latest milk production report will help.

“We’re not in a situation of dire straits with milk supply yet, the questions are what kind of July, August and September type weather are we going to have, and what is that going to do to milk supply.”

It is already pretty hot in certain areas of the country, we have had some reprieve but so far we are on track for what looks like a hot, dry summer. Kurzawski said for the dairy complex over the past month as been like, “Let’s shoot first and ask questions later. Let’s make sure we are prepared, we have the product bought and put away and we’re not guessing about moving forward.”

The markets breathed a collective sigh of relief after the much-awaited Greek elections Sunday saw the new democracy party winning by a thin margin.

“It does speak towards a unification there for Greece. At least a staving off of what could have been a currency debacle…away from the Euro Zone…that would have been a very deflationary event for commodities globally as well as U-S commodity markets.”

Moving forward, perhaps kicking the can down the road a little longer here with the problems in Greece. Now the focus is more on Spain

It’s Always Darkest Before Dawn

(May 8, 2012) When will dawn arrive for dairy producers? FC Stone dairy economist Dave Kurzawski reported on Tuesday’s DairyLine that we might have seen the low for cheese this year. 

The spot cheese market saw blocks starting the week unchanged but barrels ended lower Monday. “The barrels were kind of forced to the downside,” Kurzawski said. “We went all the way down to $1.45 then finished a quarter-cent lower.” 

There is buying interest out there and Kurzawski believes we might have hit the low as long as we can maintain the $1.45 to $1.55 price through May. He admits that it is a big request this early on as the butter and powder markets remain weak. 

“There is still room to go to the downside for cheese and Class III,” he said. “I’m not saying that is not going to happen.” Dairy producers may have to make some drastic farm level decisions sooner rather than later as the profit margin on the farm is akin to the second quarter of 2009. 

“There are good times to put hedges on and not so good times, right now we are in that no so good time to be putting a hedge on,” he said.  Even with $14-$15 prices out there, “The market has just taken a severe decline over the past three to four weeks and markets don’t typically go straight down.” 

If you are looking to put some hedges in place, monitor the grain and feed costs, which also could show some weakness moving forward.  

“The market is making it real easy for you,” Kurzawski stated. “As a producer it’s real difficult to put any hedges of any worth on at this point and time.” He advised dairy producers to sit back and be concerned with other aspects of the business rather than hedging. Hopefully a Class III rally in May will change the tune and producers can start to look at places to mitigate some risk.

Cheese and Butter Prices Were a “Little Lofty”

(Novmeber 30, 2011) CME Cheese prices slipped the week of November 29th. Block cheese lost 4-3/4 cents, closing Friday at $1.74. Barrel cheese lost 12-3/4 cents on the week and closed Friday at $1.7125.

“Relative to the world price, both cheese and butter are a little lofty,” FC Stone Sr. dairy broker Dave Kurzawski said to DairyLine after the markets closed Tuesday. He noted that there’s a resurgence in buying not only in the dairy complex but also in other commodity markets, including the stock market. Domestic demand for cheese has really been the driver for the past two months and that continues to be the case., according to Kurzawski. 

“Longer term the $1.80 (cheese) probably looks a bit too high, but for right now I think we have some solid footing on this cheese price.”

There was “a bubbling up of price” last week in the CME milk futures. “We still maintain a somewhat discounted price,” he said. “Really the Class III market has been a beneficiary of the stronger dry whey futures prices, up a quarter to 1 ½-cents higher all the way through the third quarter of 2012.”

Dry whey prices continue be strong and that helps the Class III market, but Kurzawski said “when you look at a cheese equivalent price… Class III is really sitting somewhere in the mid-to-high $1.50 price range.”

Looking at Class III milk futures, he says the biggest gainers will be the second and third quarters of 2012, adding it’s a good opportunity to lock in a forward price or doing some milk marketing.

”I do think producers will be on the winning end of a cheaper feed and better milk price scenario going into 2012,” he concluded.

Market Analysis with Dave Kurzawski

After seeing declines in the CME spot markets last week, prices are heading in the opposite direction this week. While we still have a two-dollar cheese market, futures are not buying into that according to Dave Kurzawski, FC Stone dairy and commodity analyst.

He said Monday was a consolidation trade after last weeks wild swings in the Class III market. “But we carry a pretty significant discount still for spot cheese…with the onus being on the market bulls, or at least the buyers of cheese here to kind of hold the market up,” he said.

CME spot butter continues to climb back up after last week’s declines. “The futures are going to foreshadow the market sentiment going forward,” Kurzawski said. “We have a very steep discount right now on the cash settled butter futures market and it really foreshadows that we could be less than a two-dollar market here within the next couple of weeks.”

He said cash settled butter futures are weak and probably will get weaker. “I don’t know how long this spot support will hold out here but again very defensive trade here in the butter market.”

Class III futures have been experiencing some swings. Last Thursday, the September Class III price dropped 75 cents.

The markets are typically quiet in August but that hasn’t been the case this year. “August has been extremely busy, extremely volatile and again we’re just trying to find the best possible price as we can,” he said.

“As the weather cools off here, in the Midwest particularly, we have this bearish bias on these dairy prices going forward. Not to mention the weakness in the international prices that we’ve seen over the past few weeks. We’re going to get more data this week that should show us more of the same. More weakening on the international front and that is expected as we start to see demand cool as we get into the fall months,” he concluded.