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

Wednesday offered a Class III correction in nearby months. Each day it seems the bearish fundamental outlook gets reaffirmed in the conversations we have, but the bullish technicals do, as well.

The cheese market traded to a mixed close, with most of the losses in the nearby months, and gains seen in the 2015 contracts.

The NFDM market traded and settled lower yesterday, likely on the heels of California weekly average pricing, which declined and moving toward the low seen on May 23. We continue to hear conflicting reports about inventories, with some co-ops reportedly building inventories rapidly, while other seem to have little spot availability. We would think with butter prices being as high as they are, milk would be making its way to the dryers and inventory would be building.

The spot butter market continued to rise on Wednesday, pushing a nickel higher and pulling futures out of their early hole. While we’ve heard more than one source say butter could move to $2.40, $2.50 and potentially even beyond, not many of those were calling for the market to go so far so fast. We’re back to a situation where the spot market is carrying a 5¢ to 10¢ premium to nearby futures months, as the market is once again nervous to keep pace. If this run up continues, demand destruction can’t be far off. If that happens, the bottom could fall out for a period of time. 


June 25 spot session results:

Block cheese: $2.0250 (unchanged)

Barrel cheese: $2.0425 (up 1.0¢)

Grade A NFDM: $1.8250 (unchanged)

Butter: $2.3500 (up 5.0¢)


Today's expectations:

• Class III, Cheese & Dry Whey to open steady to mixed

• NFDM & Class IV to open mixed

• Butter to open steady


Grain futures

It was a slow day in the grain markets as everything closed within 5¢ of unchanged. Export sales are due out later this morning, but following that all eyes will turn towards next Monday’s USDA Grain Stocks and Acreage reports. Current trade estimates see a wide range in corn stocks.


Today’s expectation:

• Grains to open higher

FC Stone's annual two-day Dairy Outlook Conference begins today in Chicago. Visit www.intlfcstone.com/events for information.

The trading of derivatives such as futures, options, and swaps may not be suitable for all investors. Derivatives trading involves substantial risk of loss, and you should fully understand those risks prior to trading. Any reference to past performance is not indicative of future results. All references to futures/options trading are made solely on behalf of FCStone, LLC. All references to swap execution and bi-lateral swaps are made solely on behalf of INTL Hanley, LLC. FCStone, LLC will clear swaps when applicable. Swaps are only available to eligible counterparties. All observations of economic, political and/or market conditions are not intended to refer to any particular trading strategy, promotional element or quality of service provided by INTL FCStone Inc. and its subsidiaries and should be construed as market commentary. All recommendations to buy or sell a specific derivative or forecasting statements regarding market activity and the pricing thereof should be construed as a solicitation in any jurisdiction in where such an offer or solicitation would be legal. Proper context and guidance including but not limited to the particular trading objectives, financial situations and the needs of the intended audience were taken into consideration when this recommendation was prepared. Contact your account representative for specific advice to meet your specific trading preferences or goals. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by INTL FCStone Inc. and its subsidiaries. Sources of information believed to reliable were used in preparing such observations, and no guarantee or representation regarding the accuracy of those sources has been made. INTL FCStone Inc. and its subsidiaries are not responsible for any redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material.