TFM360 Dairy 02-06-2020

Dairy Products Bounce Back as China Removes Some Tariffs

Late last night China announced that they would be removing a portion of the tariffs on goods imported from the United States. While this news doesn’t appear to have helped grain markets all that much, dairy products happily received the news. Powder and whey markets seemed to be the biggest winners of the day as whey and powder prices jumped 1.5 cents each. Cheese prices were only up 0.125 cents as barrels moved 1 cent higher on 16 loads traded and blocks moved 0.75 cents lower on 1 load traded. Butter was unchanged, but increased volume in the spot butter trade continues as 34 loads traded hands today.

Class III prices moved higher today as the 2020 average pushed 11 cents higher. Class IV prices also moved higher today but nearby Class IV prices remain behind Class III prices with the February contract holding a 42-cent spread between each other. The real spread of concern is still the block/barrel spread on the spot market at 43 cents block price over barrel price. It was somewhat supportive to see barrels moving up as blocks moved down. For supportive price action, we will likely need to see barrels rising faster than blocks fall.

Dairy Spot Trade

U.S. Dollar Index Rising

The U.S. dollar index rose to 9-week highs today and retested the November high at 98.54
A recent technical breakout over the descending blue channel looks to be supporting recent positive news for the dollar
Recent economic data for the United States has been beating analyst estimates, a positive jobs report appears to be behind this weeks rally
A breakout over the November High would indicate that we could go and retest the 2019 high for the dollar index
As the dollar rises it will make U.S. agricultural goods less competitive on the global markets and could hurt our exports