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

The Class III futures posted mild gains despite another strong showing in an active spot cheese session. The blocks gained five cents on eight trades, while the barrels leapt 5.25 cents higher with a single trade. The Class III futures in 2012 only managed gains ranging between three and 15 cents, while out in 2013 prices settled between three lower and nine higher on a total of 1,308 trades. The fourth-quarter 2012 contracts were the strongest performers, with the Oct contract leading the way, gaining 15 cents to close out at $19.77. The fourth-quarter pack gained 12 cents to settle at $19.71. These contracts look destined to test the $20 quickly, but this level could provide a measure of resistance in the near term.   

More pre-USDA Crop Report positioning led to another volatile day in the grain markets. Prices started lower to start the day, with the Dec12 corn as much as eight lower to $7.92 ½ and the Nov12 soybeans touching $15.55 ¼, 10 ½ lower, before charging higher in the later part of the day. The Dec12 corn settled at up 16 cents to $8.16 ½, while the Nov12 beans closed out up 15 ½ to $15.81 ¼. The Dec12 wheat contract touched an intraday low of $8.83 ¾, down 19 cents at that point before driving higher into the close to settle up 10 ¾ cents at $9.13 ½. 

Expect more volatility today as market participants place their bets before the report which calls for some drastic cuts in yields.  

We look for corn to open eight to 10 cents higher and for beans to open 8 to 10 cents higher.

Daily CME spot market prices:

Block cheese: $1.85 (up 5 cents)

Barrel cheese $1.825 (up 5.25 cents)

Butter: $1.735 (up 2.5 cents)  

Grade A NFDM: $1.405 (up 0.5 cent)

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