Trader?s Ponder Dairy Dilemma For 2016
Fundamentals
Like most commodities in 2015, milk prices were mired in a bear market slump following the huge drop in prices seen in 2014. The decline in international dairy prices has finally convinced many producers to cry ?uncle? as milk production is seen declining in the leading dairy exporting countries.
The biggest decline in production is seen from New Zealand, which is the 8th largest global milk producing nation at approximately 21 billion liters annually. While a slowdown in global Milk production appears likely going into 2016, current dairy inventories remain more than ample to meet current demand. This overhanging supply may act as a headwind for any price recovery in the first half of the New Year.
Many analysts now expect any meaningful recovery for Milk prices may not occur until 2017, when the effects of improving global economic growth and lower Milk production will finally begin to skew the supply/demand situation for dairy products back in favor of the bulls. In the meantime, dairy futures traders should expect choppy trading action in 2016 as the market struggles to digest the slow shift in dairy market fundamentals.
Technical Notes? – View Today’s Chart
Looking at the weekly chart for February Milk futures, we notice prices finally trying to from a near-term bottom after seeing price decline for 9 consecutive weeks. The 14-week RSI has rebounded off recent lows but still remains at oversold levels with a current reading of 25.75. The next major chart resistance level is not seen until prices move above 15.00 which is where the last price consolidation level occurred and is also currently near the 20-week moving average. Support is found at the recent lows near the 13.25 price level.
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