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

Class III futures started off the holiday-shortened week with a bang, as prices rallied across the board. The nearby June and July contracts garnered the most interest, rallying 72¢ and 74¢, respectively. Not to be overlooked, every Class III contract from July to December made new contract highs.   

Dry whey futures finished mostly flat on very light volume. Chatter in the country is of dry whey remaining somewhat snug, but what we would call largely in balance for now. We look for mixed trading action on dry whey today with an increase in volume.

Butter futures took center stage yesterday, as the discounted futures market erased some of the steep discounts to spot.  Then spot butter went up again.  Spot butter is now at its highest price since October 2010, when the market peaked at $2.2325/lb.  It’s also 12.25¢ below its all-time high of $2.3750/lb. reached back in 2004, on the heels of the first case of BSE in the U.S. and a plethora of herd retirement programs.

If it is not clear by now, butter prices have taken the weight of carrying Class IV to lofty levels.  The question is for how long?  We expect that butter prices in the mid-$2.20s will free up some butter in the short-term.  However, cream demand remains strong, and weather issues this summer could keep the butter market tighter than expected for longer than expected, unless we see more imported fat from the European Union.

NFDM came along for the ride in a somewhat reluctant fashion.  Commercial buyers see value in the forward curve, but they’re not buying more than they need, and they don’t seem to be too willing to pay up aggressively for it.


May 27 spot session results:

Block cheese: $2.0200 (unchanged)

Barrel cheese: $2.0325 (up 1.25¢)

Grade A NFDM: $1.7975 (up 0.5¢)

Butter: $2.2500 (up 7.0¢)


Today's expectations:

• Class III, Cheese & Dry Whey to open mixed

• Class IV & Butter to open mixed

• NFDM to open steady to higher


Grain futures

Grains again traded lower Tuesday as planting continues along a solid pace and is hitting expectations amid largely friendly growing conditions. Eventually we see more risk to the downside for corn.  There seems to be little fundamental reason for a rally in new-crop beans right now, but the old-crop balance sheet could keep selling at bay until the market feels it has bought enough acres. We still look for more weakness on beans than on corn moving forward this week.


Today’s expectation:

• Corn to open lower

• Soybeans to open higher


FC Stone's annual Dairy Outlook Conference will be held June 18-19, in Chicago. Visit www.intlfcstone.com/events for information.

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