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

After the price rally for Class III during Wednesday’s trading session, calmer heads prevailed Thursday as the futures market edged mostly higher on considerably less volume. Thursday was really marked more by a sense of futures price consolidation than anything else. Firming dry whey prices helped support Class III, offsetting a negative knee-jerk reaction to another 1.5 cent decline in the spot barrel market. 

Although we hear of fresh barrel cheese available in the Midwest, there seems to be a growing consensus that further downside for spot barrels is limited. While we can’t rule out the possibility that the quiet block market slides lower to close the spread, our expectation is that the recent barrel declines will only serve to attract more barrel buy side interest in the low-$1.70’s. This is not barrel demand season, but there will be an interest in keeping the block/barrel spread in line as we roll into December.

Corn and soybean markets tested and broke through Wednesday’s trading highs, but hit a headwind of technical sell pressure at key areas of resistance Thursday. It didn’t help matters that weekly export sales fell short of expectations. While another rally for the grain complex may occur in December, these markets look poised to edge lower as we head into December.

Though the summer drought is behind us, remnants remain. Earlier this week, President Obama was asked for an emergency directive to keep the Mississippi River moving by increasing the flow from the Upper Missouri and also blowing up rock formations that are hazardous at coming water level. Sponsoring the letter are the governors of Missouri, Illinois, and Iowa, 15 U.S. Senators and 62 members of the House, and a multitude of grain, fertilizer, metals, and export industry associations among others.

We look for corn to open 1 to 3 cents lower and soybeans 10 to 15 lower. 

Block cheese: $1.825 (unchanged)

Barrel cheese $1.74 (down 1.5 cents)

Grade A NFDM: $1.5575 (unchanged)

Butter: $1.6125 (down 1 cent)

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