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

The consolidation of Class III futures Wednesday gave way to more selling pressure Thursday as both blocks and barrels continue their contested decline, while dry whey futures plummeted to limit down. Futures showed respect by pushing to fresh lows for the recent six-week price decline. April led the way lower, trading an intraday low of $14.84 before finishing a few pennies from the $15.00 mark. Prices finished between .01 higher and .26 lower across the board on a heavier volume of 1,718 contracts.

Everywhere we look, news and discussions about current supply/demand fundamentals come up bearish. Retail and export sales are sluggish and supplies of milk are burdensome. With that kind of news, it’s hard to find any reason to be bullish for now. But the nature of futures markets are sometimes far more emotional than logical. And with the tempo of calls from worried producers increasing, as fears of massive farm-level losses mount, it seems highly likely that a bottom is near — even if it is simply a short-term bottom.

Cheese futures also saw an uptick in volume, trading 252 contracts between .015 higher and .012 lower. Interestingly, it was the March contract that saw the gain of .015 cents to settle at $1.5350. If it hadn’t been for the sharp decline on dry whey, the trade may have paid more attention to the fact that amid all this bearish news — March cheese is trading higher.

Yesterday was a relatively light news day for the grain complex. There is no question that grains are benefiting from last summer’s U.S. drought-shortened crop, weather reduced crops in South America, dry conditions in much of the U.S. Corn Belt, and uncertainty surrounding planting weather to come. Today’s prices have already baked in much of this news, and yet markets fail to go higher. The grain complex needs a fresh dose of bullish news to push higher today.  Otherwise, we look for a weaker trade to finish the week and begin the next.

We look for corn to open 3 to 5 cents lower and beans to open 1 to 3 lower.

Daily CME spot market prices:

Block cheese $1.4675 (down 1.25 cent)

Barrel cheese $1.47 (down 0.5 cent)

Butter:  $1.415 (unchanged)  

Grade A NFDM: $1.2925 (unchanged)

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