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

The herd is bearish right now and with good domestic fundamental reasoning: there is a strong supply of U.S. milk right now and we are about to flush strongly; we are (currently) highly dependent on discounted exports vs. foreign competitors; we have imported a lot of cheese into the U.S.; butter inventories are strong, and milk production continues to shift toward a cheese-producing Midwest.

But, despite this, perhaps the global price strength amidst an Oceania without much milk and an EU treading milk production waters at best… maybe the U.S. can keep prices afloat and remain positioned for a price run-up in cheese products before the half year mark is up. Certainly, the whey price has remained well supported and lending strength to Class III pricing. Certainly, the cost of carry structure to cheese futures and Class III milk has presented an opportunity in which traders can buy cheese today, sell futures and hold inventory till profitable sales later in the year.

Time will tell, but the biggest pressure on U.S. dairy futures is over the next 30 to 60 days. If we don’t break in that timeframe, then watch out ABOVE.

Spot session results:

Block cheese: $1.55 (down 2.5 cents)

Barrel cheese $1.535 (down 2.5 cents)

Grade A NFDM: $1.4975 (unchanged)

Butter: $1.59 (up 1.5 cent)

The key trade concept in the corn market of late has been the widening of the old/new crop spread as a result of old crop tightness and favorable growing weather conditions for new crop product.

This morning, we look for the grain complex to open higher across the board as technical support is coming in and bringing us toward resistance levels

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