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

Class III activity was moderate Monday with 767 contracts traded. While prices started off the morning mostly lower, Class III futures from June through October jumped after spot session which saw blocks hold steady at 2.11, while barrels were bid up ¼ cent. With Class III carrying a fairly steep discount to spot, many were waiting to see if spot prices would drop after the bull run we’ve seen over the past two weeks. When blocks held steady, while barrels advanced, spot prices in the front months rallied, led by July which picked up 16 cents.

At first blush, it appeared that the run up in prices was mainly a function of the “hold” on 26 million lbs. of cheese placed by a major manufacturer last week, which pulled excess product from manufacturers that typically sell on the spot market. Looking forward, if the spot market continues to hold at these lofty levels over the next week, then the market may find additional support today. But given the somewhat foggy fundamental picture, it is hard to imagine prices remaining above two dollars or $20.00/cwt for an extended period of time.   

Cash cheese futures mostly followed Class III higher in the front months on relatively light volume with only 4 contracts traded. Prices were 0.1 to 2.1 cents higher.

Forty-three contracts traded in Class III overnight; prices were lower in front by as much as 9 cents and higher elsewhere by as much as 7 cents. The market needs more fuel to run, but it won’t just collapse without a push either. We are consolidating following a big price move.

We look for Class III to open firm.

Corn prices moved lower yesterday as the price action looks rather toppy indeed. Many analysts are suggesting that the USDA estimates can’t really get much worse, so the top just may be in.  Weather will be the ultimate deciding factor, but for now people are taking profits.

We look for corn to open 10 to 12 cents lower; soybeans to open 4 to 6 lower. 

Daily CME spot market prices:

Block cheese: $2.11 (unchanged)

Barrel cheese: $2.07 (up 0.25 cent)

Butter: $2.14 (up 1 cent)  

Grade A NFDM: $1.65 (unchanged)        

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Source:  FCStone/Downes-O'Neill