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

Class III futures continued to find strength to the upside despite a weakening cash market. The June contract led the way to the upside, closing at $21.22/cwt. and within earshot of its contact highs. July followed closely behind, closing at $20.43/cwt. That strength was enough to spark residual strength through the middle of 2015.

So, where is this market headed as we move forward into May? We continue to see a softening spot market for cheese. The general consensus at the annual ADPI conference was mixed, with arguments being made for both bulls and bears. As weather continues to improve in the Midwest, a case could be made that stronger production is coming directly in the pipeline. It may not be the “wall” of milk that was expected just a few weeks ago, but it could be enough to blunt future rallies in the market and bring U.S. prices more in line with the international market.

 Dry whey continues trade at the upper fringes of its range on the heels of lackluster cheese production, solid demand, specifically for concentrates, and inventory tightness. Until cheese production is ramped up, expect the whey stream to be tight moving forward.

Class IV futures rocketed to the upside to finish out the month of April with the strongest gains seen in weeks. Strong gains were seen throughout 2014 with spillover strength into 2015.  NFDM futures shrugged off the weaker spot prices and posted strong gains. In similar fashion, butter futures rallied hard on firm spot prices, solid demand and relatively tight stocks. We have been of the opinion that butter is the most bullish of the dairy complex.


April 30 spot session results:

Block cheese: $2.1350 (down 3.5¢)

Barrel cheese: $2.1300 (down 4.0¢)

Grade A NFDM: $1.7875 (down 1.25¢)

Butter: $1.95 (up 4.0¢)


Today's expectations:

• Class III & Cheese to open higher

• Dry Whey to open steady

• Class IV, Butter & NFDM to open steady to higher 


Grain futures

The grain market posted mixed results as it digests fundamentals. Corn futures all closed lower as funds took profits and weather forecasts were reported to be a bit friendlier to planting activity. Soybeans traded mostly lower, with the exception of the May contract.


Today’s expectation:

• Grain complex to open lower

FC Stone's annual Dairy Outlook Conference will be held June 18-19, 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.