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

Wednesday was marked by heavier trading volume for Class III, with more than 1,400 contracts trading hands in a modestly higher trade. While price strength was more pronounced in the September through November contracts due to strength in the dry whey market and, perhaps, a meager attempt to narrow the massive monthly spreads, the lion’s share of trading — 581 contracts — was reserved for the July contract. 

Though the spot barrel price was bid up 1 cent to $2.0875, while blocks settled unchanged at $2.13 for the 7th consecutive session, it is clear that the nearby Class III contracts lost steam as they edged higher intraday. With the long holiday weekend in the foreground, and amid the uncertainty of spot market prices, traders are reluctant to push prices much higher for the time being. When we run out of steam or fresh bullish news to trade on, futures prices ought to trade lower once again. We expect there is risk of that here before the week is out.

Cheese futures traded mostly higher on 27 contracts and finished between -.010 and +.010.

We look for Class III to open mixed.

Corn prices shot 20 to 25 cents higher out of the gate Wednesday as a mixed of short-covering and pre-report positioning continued Tuesday’s buying frenzy.  The rally rather quickly faded throughout the day as traders faded the rally against strong areas of technical resistance. 

While forecasts call for very hot temperatures in the Corn Belt, the 6-10 day outlook is not threatening as weather maps point to much cooler weather with near normal rainfall in the key grain growing areas of the Great Plains, Midwest and South, according to most forecasts. As for this morning it won’t be weather but rather the USDA reports on U.S. planted acreage and stocks of grain in U.S. bins on June 1st that will be very important to traders.

Note: After the report came out Thursday morning, the FCStone/Downes-O'Neill group had this to say:

Corn: This is a very bearish report on corn Planted acreage is estimated at 92.2 million acres vs. a 90.8 average trade estimate this would likely result in a carryout over 1 billion bushels for the coming crop year. Stocks were also bearish in comparison to estimates at 3.67 million bushels vs. an average trade estimate of 3.32 million. We would look for corn to open limit down on this report with OTC indications showing December corn around 6.10 just after the report release.

Soybeans: As much as USDA blew trade estimates out of the water on corn, the soybean acreage estimate dropped by, with USDA acres at 75.2 vs. a 76.5 average trade estimate. This would likely lead to beans being sharply higher as it seems ending carryout will fall to demand rationing levels if not for the bearish corn report. The stocks estimate was bearish on beans coming in at 619 million bushels above trade estimates for 591 million bushels. Early calls are for beans to be down 20 to 25 in sympathy with corn.

 Daily CME spot market prices:

Block cheese: $2.13 (unchanged)

Barrel cheese: $2.0875 (up 1 cent)

Butter: $2.03 (up 1 cent)  

Grade A NFDM: $1.625 (unchanged)        

These data and comments are provided for information purposes only and are not intended to be used for specific trading strategies. Commodity trading is risky and FCStone Group, Inc., International Assets Holding Corporation, and their affiliates assume no liability for the use of any information contained herein. Although all information is believed to be reliable, we cannot guarantee its accuracy and completeness. Past financial results are not necessarily indicative of future performance. Any examples given are strictly hypothetical and no representation is being made that any person will or is likely to achieve profits or losses similar to those examples. References to and discussions of exchange traded products are made solely on behalf of FCStone, LLC. References to and discussions of OTC products are made solely on behalf of INTL Hanley, LLC, and OTC products are only available to eligible counterparties.

Source:  FCStone/Downes-O'Neill