(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