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

Class III Futures

The rally continued in Class III futures Wednesday as contracts settled 16¢-20¢ higher through the end of the year. Cheese futures provided support for Class III by moving higher in each month that traded. The Aug – Dec contract average settled at $1.9736 (UP 0.0116). Cheese futures are at a slight premium to spot prices which could mean that spot prices have more upward potential, but it also could mean that cheese futures are overpriced. Either way, the current prices have provided a great hedging opportunity for dairy producers.

Class IV Futures

The strong bullish movements in butter futures continues to spill over into  the Class IV market as the Aug – Dec contract average settled at $21.26 (UP 0.34). Butter futures settled up the limit in multiple months for the third day in a row. The Aug – Nov contracts settled up the limit (UP 0.0500) Wednesday, and the December contract settled at $1.8300 (UP 0.0450). The spot butter market has seemed endlessly bullish this week. Wednesday’s session was no different as the spot butter price was increased by four cents. If this trend continues butter futures will continue to play catch up to hold the gap between futures and spot. 

CME Spot

Wednesday’s spot cheese session showed more support for cheddar blocks at their current price level, but barrel buyers were quiet. Cheddar blocks traded above the barrels for the first time since the 9th of July. The block / barrel spread has now been reduced to 3/4 of a cent. Butter had another strong spot session as nine loads traded and the market settled four cents higher.

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