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

USDA’s milk production report was released last Friday for the month of May 2011. In our opinion, the report was neutral. Milk production was up 1.5 percent in the top 23 dairy states and 1.3 percent across all 50 states, the second consecutive month increase of less than 2 percent but slightly above our estimate for a 1.0 percent gain. We doubt that this report will have much if any impact come Monday morning. Cow numbers in May were 15,000 higher than in April. Milk production per cow increased from April, as is typically seasonally. 

In reviewing the data, we would make the case it’s easier to build a bearish argument than a bullish one from this report due to the continued growth in total production, along with the fact we continue to add cows. The general trend seems to be better production in southwestern states, while slowing production in the Midwest and East, but things were relatively mixed as cooler weather patterns haven’t led to large increases in milk per cow.

We look for Class III to open mixed. 

Corn prices closed mixed last Friday. They began by bouncing across the board, and while new crop was able to pick up 7 cents of recovery following a recent beating, old crop was unable to hold onto gains into Friday’s close as it finished just over a penny lower. The market has switched quickly to a sell-the-rally tone from a buy-the-break tenor. Spec traders are not fleeing, but are looking for the door. Hedgers are feeling compelled to buy some after such a substantial break, and we are of the mind-set that as ethanol subsidies come under full-scale attack, it will take a significant weather scare to get prices back up above current levels by much.

Sunday night prices began with a significant move to the upside but quickly faded. By morning, corn remained weak as the U.S. dollar soared.

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

  • This week, we will get inflation reports from Hong Kong, Malaysia, and Singapore.
  • Some expect the Fed to cut economic forecast.
  • Europe set to OK more aid (16.8 Billion USD) for Greece – turning into a black hole quickly.
  • Acceptance that Greece will be forced to leave the EMU is here, the only question is when.
  • European stocks and the Euro fall on Greece worries.
  • U.S. is in preliminary peace talks with Taliban in Afghanistan.

Daily CME spot market prices:

Block cheese: $2.12 (up 0.75 cent)

Barrel cheese: $2.0675 (down 1 cent)

Butter: $2.14 (unchanged)  

Grade A NFDM: $1.6525 (down 0.25 cent)        

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Source:  FCStone/Downes-O'Neill