Yesterday we saw over 750 lots trade in WMP in June at $3800, July at $3945 and August at $4040. This morning July WMP has traded own $245 to $3700.
WMP is now down over 25% since its peak late last year. We have been of the view that these dips should be bought but the size and velocity of the decline has us reconsidering our view. Markets cannot go one way forever but there are some big fundamentals factors in control at present being strong margins and weak Asian demand.
We have seen a decline of over 10% in corn prices in recent weeks which just increases margins for dairy farmers. Milk prices in the U.S. are still high, within 10% of their highs though Class III has come off the boil. Asian demand appears to be weakening which is no surprise given their economy is also off the boil. They were big buyers last year at record prices so perhaps inventory levels remain high.
