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

Class III futures held fairly firm, particularly in the 2012 months, prior to the spot session. The barrel price fell, and that had been seen as an area of support. When the barrel price came under quick pressure out the gate, the futures floor fell out from under them. It seemed to no longer matter “who” was buying so much as it mattered that the spot cheese market appears more resigned to a choppy sideways trade and the premium in the futures ought to be eroded. The sentiment is that there is some level of demand here, but the kind of demand needed to crank the market up a dime is likely out of the cards for now.

CWT assisted with an additional 6.8 million lbs. of cheese exports. Twelve requests for export assistance were accepted from Darigold, DFA and UDA to sell cheddar and Monterey Jack into Asia, N. Africa and the Middle East for delivery between October 2011 and March 2012. The timing of this was pivotal as there has been rampant talk questioning the financing capabilities of CWT.

Following some massive sell-offs in recent weeks, yesterday the grains appeared to have bottomed for at least the short term. Overnight, markets continued the new trend as weekly USDA reports actually seemed to matter once again. Enter fundamental concern, enter rational trade and we could bounce a good 30-50 cents more in corn before what we anticipate might very well be the next major wave down.

Corn harvest was reported at 15% this week vs. 10% last week and 26% last year; enough to spark some concern. Furthermore while corn condition was reported at 52% this week, up 1% from last week it’s still well behind last year at 66% and the average at 63.8%. Bean conditions were reported unchanged at 53% bit still down heavily from last year at 63% and 61% on average. The bounce is on and the outside markets are aiding and abetting as indicated above, but bounce of these magnitudes seem highly unstable.

This morning, we look for corn to open 10 to 12 cents higher and beans to open 10 to 14 higher.

Daily CME spot market prices:

Block cheese: $1.73 (up 0.25 cent)

Barrel cheese $1.69 (down 1.75 cents)

Butter: $1.76 (down 1 cent)  

Grade A NFDM: $1.490 (unchanged)

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