Potential For Lower Feed Prices

Matt-MattkeJuly 16, 2013 —  CME block cheese started the week trading at $1.6750 while the barrels slipped a half-penny on Monday to $1.6450. We asked commodity consultant Matt Mattke with Stewart-Peterson, Inc. to share some insight on the latest market activity.

Mattke: Blocks and barrels, I mean overall we’re just continuing to chop lower since the April highs.  We’ve been able to manage a couple up weeks since the April highs, but overall we’ve had just more offering than bidding.  Even here recently when we’ve had some aggressive bidding, going back to the end of June into the first week of July, there have still been plenty of sellers.  We have some traders on the sale side that we haven’t seen on the sale side too much here in the past.  The spot market seems to signal that we’re still alright as far as cheese availability goes.  Maybe that will change here in the coming weeks, but the weather is starting to turn, it’s been hot down in the Southwest, and it’s really starting to kick in Midwest.  We’re looking at above normal temperatures here, so seasonally we should be able to work higher if the market’s going through a bit of a larger correction here we can still work off into the mid 180’s to low 190’s.  If we’re going to do it, we’ve got to do it pretty fast from a seasonal standpoint, going into the end of July or August is really our window of opportunity.

DBR: We’ve been hearing the optimistic news of lower feed prices in the coming year, but you’re saying there’s still a lot of “if’s” out there to be answered?

Mattke: The potential is definitely there.  We’ve poked below the five-dollar mark here a couple of times in the last several weeks, and so we’re some price lulls that we haven’t seen in well over a year.  I’m getting below last summer’s low of four ninety-nine on the December contract, and there is an opportunity there by the end of the year to see some even lower prices towards four and a half or even lower than that.  We’ve still got some hurdles to get through.  Pollination is right here, basically next week is where a lot of the crop really starts to pollinate and then [will continue] into August.  [If] the weather forecast stays extremely hot like this, if we don’t get any rain to materialize, that may have some impact on the price direction near-term with how late the planting was this spring.

We’re still looking at needing to get through the growing seasons and without an early frost.  That could be pretty detrimental, so the crop is, with this heat, it’s good that is helping the late stuff to catch up, and it may not be a great thing here as we have a lot of the early stuff reaching that pollination phase.  In the next couple of months there is still some risk and if the weather doesn’t cooperate, going back to six or six and a quarter could happen pretty easy.  Weather-driven rallies tend to happen fast, so it could be a five or ten day stretch and we’re at a drastically different price level then we were.  The opportunity is definitely there.  If we’re going to deal with weather problems definitely what we’ve had so far this year as far as having a lot of moisture that has delayed things, it is definitely better to have the moisture than to go through what we went through last year.  If we can still have good crops with delayed planting and even not getting all the acres in the ground we had hoped for.

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