Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.

Roughly 20 percent of yesterday’s volume in class III was traded in the overnight session. The market price fluctuations were tame; the August contract only had a 24 cent price range while September had only a 19 cent range. Spot pressure allowed futures prices for both class III and cheese futures to ease in nearby months but by in no fashion did anything ignite a selling force for more than a moment, in fact late day trading post settlements was higher. It was a good volume but stifling day in which divergence was once again accentuated- divergence between calendar sentiments with nearby’s bearishly pressured and deferred’s bullishly supported and also a divergence amongst fundamental opinion with the West Coast finding bullish weather support but the rest of the country thus far largely compensating for the heat loss of milk production in the West. Whey market trading was uninspiring in any direction but that is not likely to last long.

We look for Class III and Cheese to open firm with dry whey mixed.

Spot session results:

Block cheese: $1.6625 (down 1.25 cents)

Barrel cheese: $1.6425 (down 2 cents)

Grade A NFDM: $1.74 (unchanged)

Butter: $1.5250 (unchanged)

Up early yesterday the grain complex really spiked bullishly mid-day as corn left from 8 higher to over 24 higher at one point with bean following right behind. We are a bit surprised by the big move ahead of the USD Thursday (estimates again below), December corn was up a staggering 4 percent mostly on short covering. The corn fund position had gotten almost shockingly low and with yesterday’s activity it came back above 50k again. Over the next 4 to 6 weeks the bulls need a serious weather issue otherwise this market (when not oversold) appears as though it wants to drift off in to the 4’s.

Expectations are for a higher open later this morning.

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