Got Milk?
Fundamentals
It?s been a great start to 2014 for U.S Daily producers as Milk prices reached record levels at the same time that feed costs are starting to move lower. Class lll Milk, used in the production of cheese, has traded at record prices in recent weeks with front-month futures recently surpassing the $24 per hundred-weight price level for the first time.
While U.S. Milk production has increased the past few years, Milk exports have soared, accounting for over 15% of total sales vs. closer to 5% just 10 years earlier. Mexico is the largest buyer of U.S. Milk products and sales to our neighbor to the south increased sharply, especially for Cheese.? However, the biggest surprise has been the sharp increase in demand for dairy products from China, where domestic dairy producers have not been able to keep up with demand and triggering increased import demand from the world?s most populous nation.
However, like any other commodity,? the cure for high prices is high prices? and as we move into Summer we are starting to see some signs that prices may have peaked for the year. Milk production in New Zealand, the world?s largest dairy exporter, is expected to increase this year, which will add supplies to the export market. In addition, domestic dairy demand in the U.S. continues to wane. For the rest of the year, Dairy traders will continue to monitor demand at current elevated price levels to determine if end users will balk at paying record high prices for Dairy, or will demand begin to diminish along with prices and call to close this historic bull market run.
Technical Notes -? View Today’s Chart
Looking at the daily chart for June Milk futures we notice price beginning to correct after trading at all time highs. Prices have now moved below the 20-day moving average (MA) but remains well above the longer-term 200-day MA which is currently near the 18.31 price level. The 14-day RSI has turned weaker with a current reading of 44.56. Support is seen at the April 14th low of 19.66, with resistance found at 21.84.?
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