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

Class III finally lost steam yesterday: weakness was seen in most months with the exception of January and February 2015. 2014 contracts settled the day anywhere from -8¢ to -15¢, while 2015 ended the day +3¢ to -10¢.  While blocks did move another penny higher, it seems that some of the bullish momentum has been lost, at least for now.

So why the Class III retreat?  Bulls have been firmly in control for the last two weeks. However, it was only a matter of time before the market corrected itself. While it may be too early to tell if this correction is only a small pullback – before another move higher – the market does feel a bit top heavy at these levels. We saw this type of run back in June.

Today, the fundamental picture is a bit different. Weather concerns have passed, production is seasonally declining and supplies continue to be tight, which has been the case for some time. Bulls can point to the school season getting into full swing; bears can point to slowing exports, and Oceania ramping up production.

Should the market see a serious correction, one should not discount another bullish run, but this one-day pullback is not indicative of a serious correction, nor a change in trend yet. It is a sign, however, that the impressive two-week run may have been overdone.

Both NFDM and Class IV futures saw significant gains through 2014. While butter slipped in the spot session, futures saw a quick turnaround, with plenty of buy-side interest pushing spot off its intra-day low.

 Fundamentally little has changed in NFDM and butter. Butter remains tight as demand exceeds current inventories. While NFDM has seen a bounce as of late, the market continues to have a weak tone.  However, it is too early to tell if this is a reversal or a short-term bounce. 


August 27 spot session results:

Block cheese: $2.3000 (up 1.0¢)

Barrel cheese: $2.3000 (unchanged)

Grade A NFDM: $1.32250 (up 2.25¢)

Butter: $2.7400 (down 1.5¢)


Today's expectations:

• Class III to open lower

• Cheese to open lower

• Dry Whey to open steady

• Class IV to open mixed

• NFDM to open lower

• Butter to open firm


Grain futures 

The corn session was quiet yesterday as traders digest reports of huge yields in conjunction with an expanding southern harvest. Weekly ethanol stocks were down 5% from last week and at the lowest levels seen in months. Soybeans have seen large swings. Traders are still expecting national yields to be higher, with more-than-ample August rains.


Today’s expectation:

• Corn to open steady to higher

• Soybeans to open higher

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