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

Class III futures picked up right where they left off last week, trading sharply higher ahead of the spot session, with limit-up moves for all 2Q 2014 months. The market is clearly on edge and trading sporadically of late. The 2H 2014 futures averaged $19.68/cwt., a gain of 35¢ on the day. We’re nearing the $20.00/cwt. mark, which is likely to be an extremely attractive level for dairy producers, and likely will bring in some heavy resistance with producers selling and looking to potentially do $18.00 puts vs. $22.00 call min-max structures. While the short-term strength seems very likely to continue, the market is likely on pins and needles with spot at a record high price, GDT due out later this morning and two USDA reports (Milk Production and Cold Storage) later in the week.

While the Class III market was sky rocketing, the Class IV market was very quiet ahead of today’s GDT event. NFDM was hesitant to make a move to open the week, and all eyes will be on WMP/SMP prices during this morning’s GDT auction. A bounce back or even unchanged prices would like be enough to push futures higher given the significant move made in the Class III market in recent sessions. But further weakness likely increases the anticipation of a pullback in prices across the board. It seems unlikely to be a quiet session.

FC Stone's annual Dairy Outlook Conference will be held June 18-19, in Chicago. Visit www.intlfcstone.com/events for information.


March 17 spot session results:

Block cheese: $2.40 (up 3.75¢)

Barrel cheese: $2.3050 (up 4.25¢)

Grade A NFDM:  $2.04 (unchanged)

Butter: $1.90 (down 2.0¢)


Today's expectations:

• Class III to open mixed

• Cheese to open mixed

• Dry Whey to open mixed

• Class IV, Butter & NFDM to open quiet, with early direction set once the GDT is released.


Grain futures

Corn prices finished near their lows of the day at $4.79/bushel for May and $4.82/bushel for December. Soybeans opened lower but closed slightly higher as continued interest from China supported the market.


Today’s expectation:

• Grain complex to open higher


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.