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

The spot markets saw a quick change once we fell into the 1.60’s early in the week — prices rebounded and are now once again near the upper end of what has been a 15-cent range all month. This is important to remember because the Chicago Mercantile Exchange Spot Market has not yet broken out above levels of resistance that traders have respected since late August, so expect that the upside is very limited from these levels at current. 

It appears most of Friday’s gains were attributable to a correction of the spread as we are still below the historical norm but no longer inverted. The big weekly gains in spot pushed class III to solid gains as well, with Q4 gaining 48 cents on the week to close spot on $18 while Q1 trailed the gains in Q4 it was keeping pace better than it has in recent weeks gaining 38 cents to close the week at $16.69.

Shares of Singapore-listed China Dairy Group surged 35 percent after Fraser and Neave Ltd (F&N) said it had agreed to sell its entire 29.5 percent stake in the company for nearly three times the Friday closing price

The week ahead sees both GDT and the dairy products report released tomorrow and bi-weekly international prices as well as weekly DMN prices on Thursday.

We’d look for cheese to hold its recent range and likely see some slight weakness early in the week, though it seems with open interest increasing on the price gains last week perhaps there is more faith in the recent movement than has been seen over the past 8 weeks of trading.  

Cheese futures saw a mostly stronger trade on Friday as 63 contracts changed hands and that brought the weekly total up over the 1,000 mark at 1,061. As with class III prices were stronger on the heavy volume as well with Q4 closing out the week at 1.739 up 4.2 cents on the week and Q1 2012 helped by Friday’s session closed the week up 0.008 at 1.644.

We look for milk to open mixed.

The spot butter market inched higher on Friday and closed the week up 2 cents as trading volume picked up to 13 total contracts as uncommitted loads are finally making their way to the exchange.  We’d expect to see that increase in the coming weeks.

We look for butter prices to open mixed.

Fundamental talk on grains has slowed recently but has been mostly bearish as export sales were very soft last week. Good weather has South American planting off to a good start on soybeans and wheat fundamentals are bearish as well with forecasts calling for better moisture across the southwestern US.  

We are now within range of the November crop report with private estimates on production coming out throughout this week. FCStone will release their numbers Tuesday afternoon with Informa coming later in the week. While the market may add in some risk premium for potentially softer production numbers we would expect to see a slight improvement there and with demand once again softening due to stronger prices we’d expect the upside to be limited through the Nov. 9 report.  

The grain markets opened very quietly Sunday night with prices mixed prior to the Japanese intervention news triggered a sharp U.S. dollar rally and pushed the grains lower. Late night trading saw corn down 4 to 7 cents, beans off 4 to 7 cents and wheat down 3 to 6 cents.

We look for corn to open 7 to 10 lower, beans to open 10 to 13 lower, meal to open 2 to 5 lower, and wheat to open 6 to 8 lower.

A safe and fun Halloween to you and your families.

Daily CME spot market prices:

Block cheese: $1.7725 (UP 5 ¼ cents)

Barrel cheese $1.7675 (DOWN ¼ cents)

Butter: $1.88 (UP 1 cent)  

Grade A NFDM: $1.43 (unchanged)

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