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

Hung over from New Year’s celebrations, the dairy complex failed to find heavy new year volume. The day started without an evening session, so it felt eerie to begin with. Alongside big bull moves in outside markets, dairy tried to go along for the ride and Class III traded up double digits early on amidst very light volume. Ultimately, corn and all the grain markets failed to sustain rallies and turned negative. Barrels increased two cents, while blocks held steady and buyer enthusiasm faded as “some” volume rolled into the dairy complex.

The path of least resistance in the dairy complex is to the downside at the moment and, except the stronger open, it played out yesterday much as we had expected in the morning commentary.

In reality, people are still on holiday in the U.S. and will be for the rest of the week with our foreign counterparts likely on holiday for a week or so longer. Until then, unless spot cheese surprises and breaches $1.80 in dramatic fashion, the path of least resistance and expectations is down in the short term.

In the grain complex, it was an interesting day. The grains jumped up on the open, following the bullish cues from the outside markets, but those gains were short-lived. It looked like the technicals had shown support last Monday. It seemed logical to think that the first of the month and year would bring macro fund buying, but that logical assessment was proven to be poppycock early yesterday ―- only bean oil remained higher, much because of the retroactive reinstatement of the bio-diesel tax credit for 2012 placing a new focus on the meal/oil spread, which allowed meal to get clobbered yesterday (down 13.7 to $405.7 in March13. Meanwhile, wheat led the general grain complex lower, ultimately having lost 22 ¾ cents to $7.55 ¼ in March13 after having been up as much as 10 cents. March corn closed down 7 ½ to $6.90 ¾, as it now appears there might be a test of support at 6.82, which is the 50% retracement and the 200-day moving average (we are at a low of $6.85 this morning as I type). March beans tossed $14.00 aside and hit as low as 13.86 before coming back to close down 17 ¼ at $13.92 ¼. The next two days trading will likely prove pivotal for the long-term trends the rest of the quarter. It looks like a real bear trend starting to develop to start the year, so negate yesterday’s thoughts, acknowledge the market move(s) and get your bear claws out for the time-being.

We look for corn to open 4 to 6 cents lower and beans 12 to 14 lower.

Block cheese: $1.76 (unchanged)

Barrel cheese $1.73 (up 2 cents)

Grade A NFDM: $1.5575 (unchanged)

Butter: $1.495 (down 0.25 cent)

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