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

The Class III market continues to give in to spot market pressure with futures closing 4 to 13 lower Jan through April as the blocks fell by a penny to 1.70 and barrels dropped ¾ of a cent to 1.6650. Deferred contracts traded mixed from -5 to +3, as volume was solid from May forward with at least 19 contracts traded in each month through the end of 2013, leading to a total volume of 904. GDT prices were mixed and offered little in terms of Class III price direction, so it seems the market is left to deal with a bearish spot market and a stronger grain market that is giving the market some fear about longer-term supply worries given the heavy culling. Based on reports from producers out West about long waiting periods to get cows in for slaughter, it seems the likelihood of a slowdown in slaughter rates is remote at best.

Spot session results:

Block cheese: $1.70 (down 1 cent)

Barrel cheese $1.665 (down 0.75 cent)

Grade A NFDM: $1.535 (unchanged)

Butter: $1.49 (up 0.25 cent)

Uncertainty continues to reign over the grain markets with soybeans picking up 23 cents yesterday to 1436.5 on growing concerns of dry weather forecast for Argentina and parts of southern Brazil. Corn, meanwhile, came under pressure early on. Both markets seem on their way to test old highs from early to mid-December near $7.65 for corn and $15.00 for soybeans. There doesn’t seem to be enough ammo to generate a breakthrough of those levels as of now, but an eye will be kept on exports, weekly ethanol production and South American weather as we move forward.

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

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