Editor’s note: This market commentary is provided by the Dairy Division at FCStone/Downes-O'Neill in Chicago, Ill.

Thursday was more or less a day of trading consolidation for Class III. After opening with a slightly weak tone, the trade firmed up and closed modestly higher well into 2012 on a moderate volume of 1,334 contracts. The June 2011 to June 2012 contracts gained between .01 and .10 by the end of the day.

Futures price support was primarily two-fold:  Initially, traders absorbed generally higher USDA international bi-weekly price data and specifically a 6-cent rise in Oceania cheese prices to an average of $2.0752. Then, there was another round of bidding during the CME spot session, which boosted the block/barrel prices to .75 and 3.50 cents, respectively. Still, with a healthy premium still built into futures prices into Q4, sharp futures price advances we’re kept at bay.

Although there has been a good deal of bullish posturing this week, it is interesting to note that futures price highs were established sometime late Sunday night. Since then, the market has largely chopped sideways. So, ahead of the Memorial Day Holiday, we expect to see more consolidation today along with the potential of some long-liquidation ahead of the long weekend. 

While Class III edged higher yesterday, Class IV futures succumbed to a mixed trade on very light volume and offers. Cash-settled cheese futures have apparently gone on holiday early, trading one contract Thursday, but rising slightly on bids. We expect volume in cheese futures to pick up again with some as we enter June.

The overnight Class III session was light as Memorial Day vacations are already upon on us with many out today for a long weekend. We saw 13 contracts trade overnight with prices steady to 3 higher. 

We look for Class III to open mixed.

It was a relatively mild trade for the grain complex, albeit higher. In fact, December 2011 corn posted a new high of $6.8475 intraday, but failed to hold those gains as selling re-emerged late in the day. The U.S. dollar has been sold off for the past few days, but the weakness appears to be a normal correction. We should all expect another round of Euro debt headline news to shake traders out of the short U.S. Dollar trade as money flows from the Euro to our Dollar. 

Weekly corn export sales data confirms China came to the U.S. for corn on the last price break, taking 4.57 million bushels of total weekly export sales at 30.7 million bushels.  Weekly soybean export sales were weak again at 6 million bushels.

This week, Reuters published results from 15 market analysts who are expecting corn acres will fall approximately 2.0 million acres to 90.34 million acres and yield would drop to 158.7 bu/acre. Soybean acres are expected to increase by 160,000 acres as total available land is expected to be lower on severe Spring flooding. Soybean yields were expected to drop to 43.1 bu/acre.

We look for corn to open slightly lower; beans to open mixed, meal to open 1 to 2 cents lower.

Daily CME spot market prices:

Block cheese: $1.7875 (up 0.75 cents)

Barrel cheese: $1.79 (up 3.5 cents)

Butter: $2.18 (up 5.75 cents)  

Grade A NFDM: $1.64 (unchanged)

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Source:  FCStone/Downes-O'Neill