Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.

The class III futures finished off the holiday interrupted week posting over 900 trades which resulted in mixed, but mostly lower, prices for the 2013 contracts.  The July contract managed to add 4 cents while the remaining contracts shed between 6 and 11 cents.  The class III market is contending with a conflux of issues that have led to the recent price volatility.  The late onset of typical summer weather led to an extended and staggered spring flush providing ample milk supplies and class III price weakness.  These mild weather conditions have given way to brutal conditions in the West while the Midwest is finally warming up.  We have heard of producers facing double digit losses in milk per cow per day out West as 100 degree plus days have been followed by still warm nights, stressing cow comfort while confronted simultaneously with feed issues.  Similar issues related to feed are popping up in the Midwest, and together have cut milk output levels across the country which should to underpin the futures contracts and lead to a bullish sentiment within the marketplace as the third quarter pushes forward.

For the week ending June 22th, the dairy cow slaughter under federal inspection decreased by 1,600 head (2.9 percent) week over week, to a total of 55,100 head. The year-to-date slaughter now totals 1,522,100 head, 3.5 percent higher than during the same period last year.

We look for Class III to open mixed.

Spot session results:

Block cheese: $1.6650 (unchanged)

Barrel cheese: $1.67 (up 1.5 cents)

Grade A NFDM: $1.74 (unchanged)

Butter: $1.5250 (unchanged)

The grain markets finished last week’s trade with strength in the old crop corn and soybeans while new crop and wheat contracts fell lower.  The July corn contract settled 6.50 cents higher to the price of 684.75 while the December contract dropped 11.50 cents to the price of 491.25.  The July soybean contract settled at the price of 1588.00, 4.50 cents higher, while the November beans slipped 22.50 cents lower to 1228.25.   

Informa released both their domestic and international crop production estimates last week.  For the US, corn production was estimated to reach 3.376 billion bushels, whereas the latest WASDE estimate pegged production at 14.005 billion bushels.  For the soybeans, production was estimated at 3.376 billion bushels versus the WASDE’s 3.390 billion.  On the international front, Brazilian corn production was estimated at 80.1 MMT, up 1.5 MMT from the last estimate.  EU corn production was estimated to be 64.4 MMT, down 0.9 MMT.  Brazilian soybean production was estimated to reach 84.3 MMT, up 1.65 MMT.  Brazilian soybean exports for the month of June were projected at 4.8 million tonnes.  

Domestic crops are facing favorable weather conditions with good crop development, with weather projections for the month of July calling for additional heat and humidity, which should continue to support the bearish tilt to the grain markets in the near term.

We look for the grain complex to open modestly firm.

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