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

Class III futures caught a bid on Thursday as the demeanor of spot cheese buyers turned more aggressive. Although blocks finished the day unchanged and barrels were only up 0.25 cents, the urgent manner in which bids were conveyed seemed to play a role in giving the futures market a slight bounce. 

Traders also shed the weaker dry whey futures as they focused on another round of firming USDA International Prices. Additionally, Dairy Market News commentary is taking a less bearish tact as it was reported, “manufacturers more engaged in the export market, mentioned increasing concern with ‘growing drought in New Zealand’ as well as firmer global dairy prices following the GDT auction last week Tuesday, as factors moving markets up.” Interestingly, however, while the bounce was on relatively light volume for Class III, the cheese futures market exploded with trading activity: 456 cheese contracts changed hands, more than quadrupling the trading volume from Wednesday. The bulk of that volume was done in the second quarter, where it is assumed that potential export contracts are part of the volume. But even deferred contracts got in on the action as October established a new contract high yesterday. Meanwhile, Class III volume registered at just 872, down from 1,132 the previous day.

We expect some follow-through buying early this morning, and while we respect the growing bullish news on the world stage and technical strength represented by some of the deferred contracts, a glut of domestic product will likely keep a lid on price advances ― both in futures and spot ― for the immediate trade. 

Spot session results:

Block cheese: $1.60 (unchanged)

Barrel cheese $1.59 (up 0.25 cent)

Grade A NFDM: $1.4975 (unchanged)

Butter: $1.64 (up 1 cent)

A weaker U.S. dollar and a ninth consecutive day of stock market gains may have rubbed off on the grain markets this week, which finished mixed on Thursday. Even though the USDA confirmed bullish fundamentals still exist for U.S. corn and bean markets, both markets have struggled with that fresh daily dose of bullish news needed to draw in new buyers. Exports sales likely provided a little support yesterday with stronger-than-anticipated corn and wheat sales and soybean sales mostly as expected. End-user buyers do not seem to have a big appetite for grains at current prices and a dwindling speculative trade leaves the grain complex vulnerable to weakness especially if the current pattern of weekly Western precipitation continues. That said, there is potential for upside as question marks will be raised heading into the planting report at the end of the month.    

This morning, we look for a mixed open across the board with little life being shown despite the weakness in the U.S. dollar overnight.

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