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

Class III Futures

The Class III market continued to slide lower Wednesday despite another bullish day in the spot cheese market. Sept – Mar 2015 contracts settled 1 to 27 cents lower. The October contract settled 27 cents lower, but during afternoon trading the contract moved down to around 43 cents lower. Cheese futures settled slightly lower in the front months, but on very light volume. Deferred contracts settled unchanged to slightly higher. As we begin to price October in Class III we cannot help but notice the huge premiums that spot cheese futures have over October cheese futures. Seeing that tells us that October may have even more upside potential, but if spot prices drop off during convergence the contract could also receive a large correction.

Class IV Futures

Another strong reversal in butter futures sent contracts much higher all the way into October of 2015. That, along with another supportive day in the NFDM market, sent Class IV futures on a rally through the first half of next year. Sept – Jun 2015 contracts settled unchanged to 39 cents higher. Butter futures are still at about a 12 cent discount to the spot market, but that may stay as spot buyers continue to buy product hand-in-mouth.

CME Spot

Wednesday’s spot cheese market saw a strong buying presence in both cheddar blocks and barrels. Six cheddar blocks traded to four different buyers, but no barrels were offered. The NFDM market continued to show a small amount of support as an unchanged bid came on the open. Another bid brought the market a quarter of a cent higher and there were no offers. The spot butter session was quieter than usual as only two loads traded as the market moved a penny higher.

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