Editor’s note: This market commentary is provided by the Dairy Division at FCStone/Downes-O’Neill in Chicago, Ill.
The Class III market opened the week on a mixed note with settlements ranging from -5 to +7 on strong volume of nearly 1,500 contracts. It comes as a bit of a surprise to know that futures finished the session mixed and well off their lows, despite the spot block market falling by a penny.
Most market participants we spoke with talked of a quiet start to the week with yet ample supplies of milk so there was little reason we uncovered for a recovery fundamentally. Technically, the market looks as though it may have formed a double bottom, and while that is certainly possible it’s difficult to say that a one-day reversal is the start of a bullish trend.
Spot session results:
Block cheese: $1.665 (down 1 cent)
Barrel cheese $1.63 (unchanged)
Grade A NFDM: $1.505 (unchanged)
Butter: $1.605 (unchanged)
In the grain complex, it’s hard to remember a day where we saw such a large one-day swing in value between corn, beans and wheat than what we saw yesterday. Soybeans started the overnight session higher on dry southern Argentina weather and reports of a large Chinese soybean purchase out of the U.S. was gasoline on the fire. Logistical issues turned Chinese buyers back to the U.S. for product, and the current supply distribution just cannot afford those concerns and the market reacted sharply.
On the day, March beans closed up 45.75 at 1470.25. Wheat and, by association, corn was on the other side of the coin as improved forecasts for moisture via a sizeable blizzard over the next few days should help ease drought concerns, improving the winter wheat crop. On the day, wheat closed down 10 at 732.25 while corn dropped 3.5 to 695.25. Nearby spreads continued their pattern of backwardation in both corn and beans which should be taken as a sign of caution tape by market bears.
We look for corn to open steady to 3 cents lower and beans to open 5 to 12 higher.
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