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

It was a big volume and open interest increasing day for Class III and cheese futures, and there was a lot of call option buying on the price break. About two calls were traded for every put. Small specs are looking caught short and hoping for further price break so both they and end-users are now competing for call option protection on the just in case scenario.

For the week ending July 20, dairy cow slaughter under federal inspection was down 7.8%, at 55,600 head, compared with the same period the previous year. Year-to-date slaughter levels are 2.9% higher than 2012 levels, with 1,735,200 head slaughtered.

Since last Thursday, the block price is down 0.75 cents at $1.7750. There have been seven trades. The barrel price was steady at $1.7600 with four trades. The spread is 1.50 cents, outside the historical range of three to five cents.

Spot session results:

Block cheese: $1.775 (up 0.5 cent)

Barrel cheese: $1.76 (unchanged)

Grade A NFDM:  $1.7825 (unchanged)

Butter: $1.43 (unchanged)

In the grain complex, we look for corn to open slightly lower this morning and for beans and meal modestly higher.

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