Editor’s note: This market commentary is provided by the Dairy Division at FCStone/Downes-O'Neill in Chicago, Ill.

Class III activity was very light Friday to end an active week. With just a lone offer in the blocks, and the spot markets each closing unchanged, futures seemed to lack much of a direction. July closing down 16 cents, given the already large spread between its value and current spot valuation, indicates the market is expecting a decline in the spot cheese prices in short order. We would expect to see declines in the spot markets early this week, and if those declines do not come, we would look for a recovery in Class III futures.

With international markets steady, as buying interest from China, Japan and Russia provides support, it does leave some question as to how much prices can break in the coming months. Our fear is that domestic interest may see a pull-back, given the recent price spike above the $2 level, and though international demand has been strong with Oceania’s new production cycle not too far in the future, buyers may slow their demand in anticipation of softer prices. This would certainly leave a market that is at historically high levels susceptible to a large pull-back, and as we all know those types of swings often times overdo themselves.

This week, will see gDT results released Wednesday.  Friday afternoon, the USDA Milk Production Report for the month of May will be released. 

Cash cheese futures, as with Class III, saw a mixed settlement Friday on light volume as just 5 trades occurred all in December which closed up 0.019 while other months were -0.001 to +0.011. The July to December pack average closed out the week at 1.812 down 0.019.

We look for corn to open 1 to 3 cents higher; soybeans to open 1 to 2 lower.

Daily CME spot market prices:

Block cheese: $2.11 (unchanged)

Barrel cheese: $2.0675 (unchanged)

Butter: $2.13 (unchanged)  

Grade A NFDM: $1.65 (up 0.50 cent)

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Source:  FCStone/Downes-O'Neill