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

  Class III futures continued to explode higher after spot buyers rallied the blocks and barrels. Big upside moves were seen through 2014, with the nearby August contract tacking on 29¢; September posting a fresh contract high on its way to a 37¢ gain; and October in close pursuit, closing 32¢ in the green. Buy interest was seen through late 2015.

The market has had a firm tone, with spot cheese players showing reluctance to stray from the pivotal $2.00/lb. level, a sentiment reinforced by last Friday’s bullish Dairy Products report. Be on watch for a Dairy Products report revision: Idaho cheese was misstated, and it’s possible NASS will make a special announcement before next months report is out. Look for a revision to show that Idaho cheese production in June was fairly consistent with May, despite what the recent report showed.

Solid buy interest in cheese futures was seen through the balance of 2014, as well as some months in 2015. Nearby months are attempting to keep stride with the cash market, while deferred contracts are hesitant to show the same exuberance.

The dry whey market predominantly stayed on the sidelines yesterday, but continues to trade at the upper edge of its range. 

Class IV futures continue to receive mixed signals, after NFDM came off a penny on the spot session, to $1.64/lb., and butter was left unchanged, at $2.40/lb. The market will be closely eyeing tomorrow’s Global Dairy Trade (GDT) results to see if the lower trend continues.

A bit of wear and tear is showing up in the NFDM market. Spot prices stalled for the better part of two weeks in mid July, and have subsequently slipped lower to start August. The market continues to have a weak tone, as we are hearing of surplus inventory overseas and domestically as well.

Butter futures were mixed, posting gains in the nearby months and selling off in the deferred contracts.


August 4 spot session results:

Block cheese: $2.0600 (up 6.0¢)

Barrel cheese: $2.0900 (up 9.0¢)

Grade A NFDM: $1.6400 (down 1¢)

Butter: $2.4000 (unchanged)


Today's expectations:

• Class III, Cheese & Dry Whey to open lower

• Class IV to open soft

• Butter to open steady

• NFDM to open weak


Grain futures

Grains managed to hold onto overnight gains and drifted higher during the open outcry session yesterday on the heels of strong export inspection numbers and fund buying. Despite putting in a fresh contract low at $3.61/bushel, December corn managed to reverse and pick up 7¢ to settle at $3.6925¢. Soybeans posted 20¢+ gains, with the September contract leading the way to the upside.   

Today’s expectation:

• Grain complex to open slightly soft


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.