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

Another 1k+ trading session brought with it price increases to the Class III market. With the still substantial price discount in place vs. the spot pricing, futures need to see spot tumble in order for futures declines. Futures prices have gone just about nowhere in the last week or more of trading as they chop around and consolidate. The July milk chart appears to have formed a bit of a double top and looks as though it has no more upward movement to go to; it appears as though it would take a spot cheese shocker of a sharp move up to give the July contract greater legs to the upside at this time.

While the spot price increase did firm up the nearby Class III prices, it did nothing to inspire back months which fell one to eleven cents from Nov 2011 to Dec 2012. In other words, July-October may have rallied (they did) but not much and the futures traders seem to not have been fooled into buying much Monday, as we closed well off the intra-day highs.

Cash-settled cheese futures traded a strong 87 times. Prices there were steady to slightly higher. Clients continue to tell us of their ability to procure cheese at a discount to the board price, and that leads us to believe a fall in price is near but we have been a bit early in our couple days of suggesting this.

In the evening session, volume came quick with 87 contracts trading before 9 p.m. in Chicago. Prices were 2 lower in June and as much as 7 higher elsewhere. By morning, 128 contracts had traded and prices were 5 lower in June and steady to 14 higher elsewhere, with most of the volume coming in the July and August months, which were 3 and 7 higher, respectively.

We look for Class III to open mixed.

Corn prices are at a bit of a standstill; they rallied as much as 7 to 8 cents yesterday, but ultimately came back to a near unchanged close with one and two tick gains. Over the next two weeks, the market will have a slew of data to digest, including the USDA Quarterly Grain stocks-in-all-positions report and the planted Acreage Report. Considerable amounts of money have left the grains recently, and there hasn’t even been much of a dead-cat-type bounce… yet.

We look for corn to open 8 to 10 cents higher; soybeans to open 10 to 12 higher.

Daily CME spot market prices:

Block cheese: $2.13 (up 1 cent)

Barrel cheese: $2.0675 (unchanged)

Butter: $2.14 (unchanged)  

Grade A NFDM: $1.65 (down 0.25 cent)        

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Source:  FCStone/Downes-O'Neill