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

Class III futures bounced on a still-firming spot cheese market, and the strength continued overnight. Cheese futures were up overnight as well.

Has the world changed? Not necessarily. Global prices still remain stable to weak at lower levels than the U.S.  Instead, the recent move higher in spot and subsequent rally in futures is likely due to holiday positioning. While we hear of some slowing domestic sales due to inevitable price increases, cut and wrap operations continue to be busy finishing up holiday orders. Since spot buyers are bidding against themselves with no cheese offers at the exchange so far this week, it is difficult to say with any degree of accuracy just when and where cheese will free up again. We suspect blocks can make it to $2.20-$2.25/lb. before barrel cheese will likely re-emerge for sale first. The price of barrel cheese has risen nearly 24¢ over the course of the last 2 weeks.

 Still there remains a great deal of apprehension in the 2015 market as market participants see an eventual end to holiday demand. With no domestic or global milk shortage on the table, weaker prices worldwide, a stronger-U.S. dollar and the expected post-holiday demand slump leaves a troubling scenario for market bulls. But prices are higher today and that strength may continue in the short-term.       

Weakness continues to permeate dry whey futures.

Butter futures moved higher on continued strength in the spot market. We see the $2.00-$2.10/lb. level as a level of market equilibrium for the time being. As with cheese, some of this recent move may be a result of some near-term inventory concerns. NFDM futures continue to weaken.


Nov. 5 spot session results:

Block cheese: $2.1800 (up 1.0¢)

Barrel cheese: $2.1600 (up 5.0¢)

Grade A NFDM: $1.1950 (down 4.75¢)

Butter: $2.0500 (up 3.0¢)


Today's expectations:

• Class III, Cheese & Dry Whey futures to open lower

• Class IV futures to open steady to higher

• Butter futures to open steady to higher

• NFDM futures to open steady to slightly lower


Grain futures 

Corn settled slightly higher yesterday. Beans also saw some strength.  The move higher was in part consolidation ahead of the USDA production estimates on Nov. 10, and in part due to good ethanol business. Ethanol plants in Iowa were reported to be improving basis while some elevators were limiting dumping hours. An active harvest continues even as weather forecasts call for a strong cold front to push through.    


Today’s expectation:

• Grain markets to open lower


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