Editor’s note: This market commentary is provided by Curtis Bosma at HighGround Dairy in Chicago, IL.

CME Spot

Monday’s CME cash session showed weakness in cheese. Cheddar blocks traded twice at unchanged before the bids pulled back and a lone seller unloaded product down to a penny lower. Cheddar barrels traded once at unchanged and then once more at 3/4 of a penny lower. Total volume in the spot cheese market was decent as five blocks and two barrels exchanged hands. After Friday’s big dip in the NFDM spot market we experienced no activity in Monday’s session. Spot butter traded three times Monday at unchanged though futures extended last week’s rally.

 

Class III Futures

The tone in Class III milk and cheese futures trading ran counter the spot market today. July 2014 through July 2015 Class III settled between 0.04 and 0.16 higher but 2014 contracts were boosted up to 31 cents higher during afternoon trading. However, Class III futures volumes remain below average on during the latest rally with an estimated 701 contracts exchanging hands on the Globex platform. Cheese futures were the real reason for the rise in Class III today. The July – December average for cheese futures settled at 1.9937 (UP 0.0118) with a range of +0.008 to +0.0210. Whey futures posted extremely low volume today and settled mostly unchanged. The September contract settled at 58.7500 (UP 0.5000) and January 2015 settled at 53.4000 (DOWN 0.6000).

 

Class IV Futures

The rally in butter futures had a big effect on Class IV milk today. September settled at 21.70 (UP 0.34). Butter futures traded up the limit (UP 0.05) in August and September for the second day in a row and the Q4 months settled 0.0275 to 0.0400 higher. Butter futures are screaming higher but still at a discount to the current spot market, so there is potential for more strength this week. NFDM futures endured a fairly quiet session with slight weakness reported. The Oct-Dec average settled at 1.6800 (DOWN 0.0033).

Tuesday morning’s Global Dairy Trade auction results and Wednesday afternoon’s May Milk Production report should provide more direction to the U.S. market.

Disclaimer: The risk of loss in trading futures and options can be substantial. Past performance is not indicative of futures results.