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

The Class III futures market closed last Friday’s trading session posting nearly 800 trades as the 2013 contracts settled with mixed results. The futures contracts settled between 12 cents lower and 6 higher with the slight gains contained within the February through April and October contracts. The 2013 second-quarter futures pack lost 5 cents Friday to close out the week at the price of $18.04, 18 cents higher than the week prior.

Friday’s World Agricultural Supply and Demand Estimates report from USDA placed the estimated milk production for 2013 at 201 billion pounds, up just 0.3 percent from the estimated total for 2012 due to stronger than expected fourth-quarter production levels. Milk production across much of the nation remains strong despite the dip in California’s production rate, led by the strength in the Midwest.

Spot session results:

Block cheese: $1.65 (up 0.25 cent)

Barrel cheese $1.56 (up 0.5 cent)

Grade A NFDM: $1.52 (unchanged)

Butter: $1.555 (unchanged)

Friday’s grains trade was dictated by the results of the USDA’s supply and demand report, which pushed the grain markets mostly lower. The Mar13 corn contract slipped 1 ¾ cents lower Friday to settle at $7.09, with a total weekly loss totaling 27 cents. The Mar13 soybean contract dropped 34 ¼ cents on the day to settle at the price of $14.52 ½, 21 ¾ cents lower than the Friday before.  The Mar13 wheat contract managed to gain ¼ penny for the day to close out at the price of $7.56 ¼, 8 ¾ cents lower than the week prior. 

The bearish mind-set of the market was instilled mostly by the USDA’s estimates for South America’s crop-production levels. The USDA pegged Argentina’s corn production above trade expectations as corn production was estimated at 27.0 million tons versus the expected 26.3, while soybean production was slightly below expectations, 53.0 versus 53.1 million tons.  Brazil’s corn production was pegged at 72.5 million tons, versus the expected 71.3, while soybean production was estimated at 83.5 million tons versus the estimated 82.6. Turning towards the U.S., the corn carryout was estimated to total 632 million bushels, up 30 over the USDA’s previous estimate, accounting for a 50-million bushel drop in exports over the January report. The soybean carryout figure fell 10 million bushels to 125 from the January report as a result of an increase in crush demand. 

We look for corn to open 2 to 4 cents lower and beans to open 18 to 22 lower.

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