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


All the hallmarks of a market starving for fundamental news were demonstrated by the Class III trade yesterday. Initially, nearby futures probed into higher territory in anticipation of a possible catalyst in the spot session and tested a breakout through trend line resistance. However, upside momentum ran out of gas and stalled back into consolidating action when direction in the cash market failed to materialize. The 2H 2014 pack average continues to hover near the $20.00/cwt.; the 4Q 2014 pack settled at $19.53/cwt.

At this point, the cheese market is leaving more questions on the table than answers. Volume has been tepid, ranges have been tight, and the spot market is straddling the $2.00/lb. level. The volatility has been sucked out of this market after violently ripping through it like a hurricane. How long can this persist? It’s a question that’s been fielded quite a bit lately as market participants are growing antsy. The answer is simple, the market will move when there is a reason for it to move.

Domestically, we are past peak production and supplies are tight on a relative scale. An argument could be made that bullish tones remain in this market, as it has weathered prolonged weakening of international prices without losing competitiveness and without having the bottom drop out of the futures market. The old adage, “if it’s not bearish…it’s bullish”, may apply here. That said, producer margin levels are still at historically attractive levels, and if downside price action is a concern, it is still advisable to put protection levels in place.


June 10 spot session results:

Block cheese: $2.06 (unchanged)

Barrel cheese: $1.9725 (down 0.25¢)

Grade A NFDM: $1.8575 (unchanged)

Butter: $2.21 (unchanged)


Today's expectations:

• Class III, Cheese & Dry Whey to open steady

• Class IV & Butter to open soft

• NDFM to open steady


Grain futures

The grains continued to trade in consolidation mode ahead of the World Ag Supply & Demand Estimates report. The corn market was pressured again yesterday and closed red across the board. There was news China will cease to issue import permits for US DDG after the disputed GMO strain MIR-162 was discovered in a recent shipment. The soybean market managed to make small gains.


Today’s expectation:

• Corn to open slightly higher

• Soybeans to open mixed


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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