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

One thing seems certain at this point, and that is technically the Class III market is overbought and it appeared throughout the day that futures wanted to move lower but were struggling to find a strong reason for doing so.

The spot session closing up 4.5 and 1.5 cents in the block and barrel, respectively, gave sellers little incentive to push to the downside, but intraday lows were made after the spot session. Settlements were 5 to 20 cents lower from June through March 2012 on a total of 1,598 trades. With open interest climbing by 346 contracts, we would term most of the activity seen yesterday as profit-taking, with longs covering.

Rumors continue to float about the physical cheese availability issue, and estimates are all over the board. With prices at such elevated levels, producers have little reason not to be adding price protection at these levels, and we continue to find it difficult to believe that the 1.85+ price futures are indicating can be sustained over the next five months.

Cash cheese saw 76 trades yesterday — all of the volume coming in the trading floor, but on the day only one month recorded a price change despite the weakness in Class III futures. November finished down 0.010 on offers with everything else unchanged.

We look for Class III to open mixed.

Grains continued to move higher today as news circulated that Russia export sales may be tighter than expected after prices there saw over 5% gains in the two days of trading following their announcement, leading the Russian Grain Union to speculate that the government might restrict exports to prevent inflation.

Meanwhile, stateside, the fear continues to be a sharply lower availability of acreage and higher abandonment, as well, with Ohio and North Dakota remaining well behind on planting and it remains wet in both areas, as well. Beans had been lagging on an expected increase in growing area with the late planting, but river flooding issues, rumored plant closures along the Missouri river and the aforementioned acreage abandonment leading trade to believe acreage may actually be lower than previous USDA estimates despite the planting delays.

By this morning, prices have remained mostly quiet along with the outside markets. We look for corn to open steady to 2 cents lower;  soybeans to be 3 to 5 higher.

Daily CME spot market prices:

Block cheese: $1.95 (up 4.5 cents)

Barrel cheese: $1.8875 (up 1.5 cents)

Butter: $2.1625 (unchanged)  

Grade A NFDM: $1.6425 (up 0.25 cent)

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Source:  FCStone/Downes-O'Neill