Editorial Comment Publisher/Editor

 

 

It’s Back To The 1980s, Briefly, For CME Block Market Activity

Dick Groves
Publisher/Editor
Cheese Reporter

December 3, 2021


Last week was quite the week for 40-pound Cheddar block spot (cash) market activity at the CME. To briefly recap the Thanksgiving holiday-shortened week: there was no block market activity whatsoever during the three trading sessions; there were no sales, no unfilled bids and no uncovered offers. Nothing.

This lack of activity brought back some memories of cheese cash market activity during at least some years back in the 1980s. And a check of recent years indicates that this year’s Thanksgiving Week trading more closely resembled the 1980s than the 2010s.

At first glance, such a comparison seems preposterous. After all, the cheese industry’s cash market back in the 1980s was the National Cheese Exchange, which met only once a week, on Friday mornings in Green Bay, WI, while the cash market these days is the CME, and trading takes place daily.

Not only that, but with daily trading, there are sometimes (often?) more changes in the CME block price in a single week than there were during an entire year of trading at the old NCE.

While that might seem impossible, or at least highly unlikely, it’s actually true: in 1981, 1982 and 1983, there were exactly four changes each year in the NCE block price, while the CME block price, just in the month of November, actually changed five times during the week of Nov. 8-12, and also changed five times during the week of Nov. 15-19.

And this pattern of daily block price changes occurred at least one week in almost every month prior to November. The one month this year in which there were no weeks with five changes in the block price was September, which actually only had two weeks with five days of CME spot market trading (the first and last week of September had three and four days of trading, respectively, and the first full week of that month had no trading on Monday due to the Labor Day holiday).

And both of those full five-day weeks in September saw four changes in the block price, tying 1981, 1982 and 1983’s annual number of changes.

Back to Thanksgiving Week, and trading activity during the 1980s compared to the past several years. At the NCE, trading during Thanksgiving Week took place on Wednesdays, rather than on the traditional Fridays.

So, in 1980, there was no block market activity at all at the NCE (although, notably, 20 cars of barrels were sold that day, all at $1.3100 per pound, which left the barrel price unchanged, just like the block price).

A year later, one car of blocks was sold at $1.3525, which lowered the price by 1.75 cents. So in 1981, one of the four block price changes actually took place during Thanksgiving Week (for what it’s worth, the other three block price changes that year took place in January, July and October).

NCE block trading returned to Thanksgiving Week “normal” in 1982, with no activity at all on blocks and the price holding steady at $1.3725 per pound. Of the four block price changes that year, one occurred in September, one in October and two in December.

And in 1983, there was again no block market activity during Thanksgiving Week, with the block price being unchanged at $1.3650 per pound. Of the four block price changes that year, one occurred in January, one in September and two in December.

Price changes became more frequent at the NCE starting in 1984 (although that’s not really saying much, given what transpired, or didn’t transpire, in the previous four years), but Thanksgiving Week remained quiet, for the most part. In 1984, there was no block market activity at all (although, reminiscent of 1980, 17 cars of barrels were sold, all at $1.3075 per pound, which left the price unchanged).

The block price was also unchanged at the NCE during Thanksgiving Week trading every year through 1990, although there was some activity during some of those years. On Wednesday, Nov., 26, 1986, for example, five cars of blocks were sold at $1.3050 per pound, which left the price unchanged at that level. But in other years, such as in 1988, there was no block market activity at all.

By contrast, in recent years, at the CME and with daily spot market trading, price changes during Thanksgiving Week have been the rule, rather than the exception.

Over the 2015-2020 period, the three CME trading sessions held during the week of Thanksgiving saw the following block market price changes: 2020, two price increases and one day of no change; 2019, three price increases; 2018, two price declines and one price increase; 2017, one price decline and two price increases; 2016, one price increase, one price decline and one day with no change; and 2015, two price increases and one price decline.

Based on that somewhat limited comparison, it’s safe to conclude that Thanksgiving Week 2021 block market activity at the CME more closely resembled Thanksgiving Week in the 1980s than Thanksgiving Week in the 2010s.

It may be recalled that the cheese industry’s cash market moved from the NCE in Green Bay to the CME in the spring of 1997, and shifted from weekly trading to daily trading in September 1998. That means that in 1997, there was one cheese trading session at the CME during Thanksgiving Week.

So what happened on Wednesday, Nov. 26, 1997? A total of 24 cars of blocks were sold (along with 23 cars of barrels), and the block price increased three-quarters of a cent, to $1.4325. So even when CME spot trading was weekly, it was more active than last week.

 

Dick Groves

Dick Groves has been publisher/editor of Cheese Reporter since 1989. He has over 45 years experience covering the dairy industry. His weekly editorial is read and referenced throughout the world.
For more information, call 608-316-3791 dgroves@cheesereporter.com
https://twitter.com/cheesereporter.


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