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

The Class III futures market feels as though it’s stuck in summer doldrums, as volume barely eclipsed 500 trades Wednesday with 534. And, we’ve seen 1,000 contracts eclipsed just once in the last three weeks. Prices were soft during the early morning hours, but the spot market looked like it would induce some activity as both blocks and barrels rose in an active session. That, however, did not occur as prices settled into a mixed market where they ended the day. June was the only 2011 month to close lower, -9, while other months were steady to +6. 2012 futures closed from -4 to +4 on the day. The recent movement higher in spot continues to see futures dragging, as they appear comfortable sitting still while waiting for the spot prices to catch up.

Cash-settled cheese prices were mixed along with the Class III market from -0.008 to +0.005 from May through August with 23 total trades on the day.

Overnight Class III trading was quiet with just 5 trades all in June which was down 9 cents other months were steady to slightly lower on offers. By this morning, just 7 trades were reported and prices were steady to 7 lower. The commodities complex surrounding milk is under heavy fire this morning and why shouldn’t dairy be lumped in as well for some short-term weakness in a longer-term bull market?

We expect Class III to open weak.

In the grains, prices were choppy throughout Wednesday’s session with some talk that focus is turning a bit toward upcoming wet weather forecasts and next week’s USDA report, along with Informa’s pre-report estimates being released tomorrow morning. Impressively, corn was able to push higher Wednesday with weaker grain markets and softer outside markets. It seems likely we’ve rounded out a pre-report bottom unless weather forecasts suddenly shift.  

With the report upcoming and private estimates tomorrow, we’d expect the grains to continue their choppy sideways trading for now, but the upside risk in our opinion remains much larger than the downside risk heading into the report — especially when you consider the slow planting pace and very cold weather. 

Overnight prices started out with corn continuing to build on its day session strength and pulling soybeans and wheat out of their early hole by late evening. Corn prices were up 3 to 6 cents, soybeans up 3 to 5, and wheat up 2 to 4 cents. By this morning, prices are weak along with most everything else, save for the currencies of the commodity buying countries — and if that’s not telling, I don’t know what is.

We look for corn to open 6 to 9 cents lower for old crop and 1 to 3 lower for old crop, and beans to open 8 to 10 lower.

Daily CME spot market prices:

Block cheese $1.64 (up 0.50 cent)

Barrel cheese $1.64 (up 2.25 cents)

Butter $2.095 (up 0.75 cents)

Grade A NFDM: $1.64 (down 0.50 cent)

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Source:  FCStone/Downes-O'Neill