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

Class III futures opened the week with a relatively light volume day, just under 900 contracts, as the nearby contracts worked to remove some of the premium versus the spot market. Using a $1.7050 block, $1.6925 barrel (a 3 cent premium vs. spot) and 57.10 cent dry whey price would equate to a $17.39 class III price vs. August which settled at $17.70, down 26 cents yesterday. Futures were unwilling to remove too much premium from the more distant months however as Sept closed down 9 cents to $18.43 but other contracts through mid 2014 were mixed from -5 to +6 cents. The spot market movement indicated more of a spread correction between the block and barrel than any indication of a directional move. Blocks, $1.6750, are now just above the barrel, $1.6625, though still below the normal historical range of 3 to 5 cents. Some of the heat chatter has died down early this week though we are hearing of a little cream tightness.

Cash cheese prices were mixed but mostly lower on the day in line with the class III market. Aug finished the day down 0.018 while Sept was off 0.012 other contracts were -0.010 to +0.007. Volume was heavy in comparison to the class III market as over 250 trades took place on the day. The market will continue to watch the spot session for short term price direction. Dry whey futures were very quiet to open the week with just 10 total trades occurring and only August, -0.400, showing a price change. Steady to lower continues to be the direction with still strong milk production.

We look for Class III and Cheese to open mixed but mostly lower, with dry whey to open mixed.

Spot session results:

Block cheese: $1.6750 (up 1 cent)

Barrel cheese: $1.6625 (down 0.75 cent)

Grade A NFDM: $1.74 (unchanged)

Butter: $1.5250 (unchanged)

Grain futures opened the week with a slightly surprising rally. Soybeans led the way closing up 24 cents to $12.5225. July beans traded to a fresh contract high, at $1609.25 for settlement, as strong basis levels persist in the country despite corn basis beginning to soften slightly over the past week plus. Fear of a continued dry weather pattern for the western third of the Corn Belt also helped to support corn and bean prices yesterday as longer term forecasts show next to no precipitation for those already moderately stressed areas. New crop corn closed just above the psychological $5.00 mark at $5.0050, up 9.25 cents on the day.

Weekly crop condition reports came out with corn condition at 68 percent good to excellent up by 1 percent from last week and soybeans rated at 67 percent good to excellent unchanged from last week. Thursday will be the July USDA report.

Expectations are for a higher open later this morning.

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