Downes-O’Neill dairy broker Dave Kurzawski echoed some of Mary Ledman’s remarks regarding barrel cheese in Wednesday’s broadcast. Kurzawski viewed the actual trading Tuesday at the Chicago Mercantile Exchange where the blocks inched a half-cent higher, to $1.4175 per pound, while the barrels rolled down hill another three quarters, to $1.35.
The wide spread is not the biggest we’ve ever seen, he said, but “a little unusual” and a “Tale of Two Cities.” There seems to be good demand on the block side of things, he said, but the barrels seem to be languishing as there seems to be plenty of barrel product available in the country right now.”
Holiday buying is a part of what’s going on, according to Kurzawski, but the interesting part is that “Buyers, by and large, have taken a step back from the market the past month, which historically is a very good demand time of year.” The prices have come down substantially, he said, so “We’re starting to see some stability in the marketplace. I suspect you’ll see those buyers step back in.”
As to risk management strategy for dairy producers; Kurzawski recommends a “wait and see attitude” and consider buying put options. “The margins really, truly are not very good,” he admitted, “Even with the weakness that we have seen recently in corn. The best bet here is to look at being a put option buyer going forward.”
The Agriculture Department releases its preliminary October milk production estimate Thursday afternoon. We will post complete details here as soon as possible.
Friday morning, USDA announces the December Federal order Class I base milk price. Market analyst, Alan Levitt, predicts it will come in around $16.98 per hundredweight.That would be a 26-cent drop from November but would be $2.99 above December 2009.