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

1H 2015 Class III futures contracts got a much-needed boost, gaining 12¢ on the day to settle at $17.40/cwt. for the pack. While front-month contracts settled mixed, with losses in the December contract, we ended on a mostly positive note to start the week. This puts the January to June 2015 contracts all at or above near-term resistance levels, which could be signaling a larger upside move. This will depend on continued upside in the spot market and reaction to the Milk Production report. Initially there was little market reaction to the report which was bearish vs. expectations, as total milk production came in up 4.0% year over year.

 Cheese markets were again the initial catalyst for yesterday’s action. It seems  the block cheese market is still tight, but barrel cheese appears to be available. This would be the perfect scenario for barrels to move up to narrow the spread, which is still a hefty 21.75¢.

Class IV contracts were relatively quiet. While some participants looked for a continued slide, others were insistent that we were due for a bounce in butter, and that is exactly what we got.

Spot butter rebounded after a 6-day slide that brought a loss of 82¢/lb. Given how far we have fallen and how fast it happened, we expect to see a move higher – if not at least a stabilize trade to give this market a breather. As we all know, dairy tends to overextend markets to extremes and this has been a prime example.

NFDM came in with a bit of a surprise in spot yesterday after hardly moving since the end of September. We saw some trading in spot, as prices dropped 6¢. 

 

Oct. 20 spot session results:

Block cheese: $2.3250 (up 3.75¢)

Barrel cheese: $2.1075 (up 3.75¢)

Grade A NFDM: $1.3200 (down 6.0¢)

Butter: $2.0150 (up 1.5¢)

 

Today's expectations:

• Class III futures to open lower

• Dry Whey & Cheese futures to open mostly lower

• Class IV futures to open mixed

• NFDM futures to open mostly lower

• Butter futures to open steady to higher

 

Grain futures 

The U.S. harvest is moving into full swing and expected to continue this week with better weather on the horizon. Corn came in at 31% harvested vs. 24% last week and well behind the 5-year average of 53.0%. Beans are being taken at a faster clip, with 53% being harvested this week vs. 40% last week, but still behind the 5-year average of 66.0%. Grain markets spent most of the day in the red, but managed to make some gains into the close.

 

Today’s expectation:

• Corn to open mixed

• Soybeans and soybean meal to open steady to higher

 

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