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

Class III saw a bit of a rally yesterday with futures settling anywhere from unchanged to +24. January saw the biggest gain on the day, closing 24 cents higher and is now 50 cents off its recent low of 17.86 made on 12-6. Prices were able to rally as spot cheese once again held its ground with blocks and barrels unchanged on the day. Blocks have now been sitting at 1.76 since the beginning of December. It looks as if some short covering is taking place currently as the move over the last week pushed RSI into oversold levels.

Fundamentally, the picture does not seem to have changed much as we hear that milk supplies are adequate and cheese plants are keeping pace with current demand, even building some unwanted inventories. Buyers may still come to the market to fill any last-minute orders, but are still leery about building up inventory.  

Corn settled a bit lower on the day, down 2 ¾ cents in Mar after the USDA essentially left the US supply/demand picture unchanged. Globally, there was one minor change by the USDA, a 10mmt increase in Chinese output. Soybeans also settled lower with March Beans down 4 ¼ cents on the day. 

Both corn and beans were dragged lower by the wheat market which saw a sizeable increase in ending carryout on both the domestic and global estimates. March wheat closed down 27.25 cents on the day at 821.5. Interestingly, while soybeans closed lower, soymeal continued to move higher finishing up 3.2 at 448.1.  

We look for corn to open 1 to 4 cents lower and soybeans 8 to 12 lower.

Block cheese: $1.76 (unchanged)

Barrel cheese $1.66 (unchanged)

Grade A NFDM: $1.5575 (unchanged)

Butter: $1.595 (up 0.5 cent)

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