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

It was quite the spot session on Tuesday as big price swings and big volume was seen.

The barrels never moved from 1.6300 and closed unchanged on the day, but a whopping 12 trades occurred. The blocks, meanwhile, saw the price fall all the way to a low of $1.68, only to rebound 4 cents and close the day at $1.72, down just ½ a cent and all of that price movement came on just four trades.

All the action in spot triggered some large swings in the Class III futures, as well. Feb, -28 and March -26, in particular, were sharply lower at one point during the spot session only to rebound into the close as most months finished the day higher. Futures finished the day from steady in March all the way to 25 cents higher in Jan with most months 5 to 15 higher. Volume was stronger than recent sessions at 1,055, but a majority of that action came during and just after the spot session. Sentiment of higher spot cheese prices seems to be picking up momentum, and the recovery seems as though it may come quickly based upon the futures market carrying a premium to the current spot prices.

Grain markets continued to soften Tuesday, unable to turn around Monday’s losses as soybeans were under pressure from the start.

USDA announced cancellations of 420,000 tons of soybean exports, including 300,000 tons of that to China. The corn market is hovering just above significant support at 7.15 in March, and there is very little support below that level. Significant questions are being raised about the potential for a lowering of production estimates of not only corn but now soybean production, as well, due to excessive moisture for Argentina.

On the day soybeans, were down 30.25 cents in Jan to 1466, pulling corn down 4 to 720, while wheat was able to close higher by 3.25 cents at 811.25.

Two big storms are projected to hit the Midwest between now and the New Year and anything less will certainly be supportive of deferred contracts. We’d still anticipate the markets holding the recent range through the Jan.  11 USDA report, but light volume in the coming weeks may allow for a pre-report breakout.

We look for corn to open steady to 3 cents lower and soybeans mixed from -3 to +2.

Block cheese: $1.72 (down 0.5 cent)

Barrel cheese $1.63 (unchanged)

Grade A NFDM: $1.5575 (unchanged)

Butter: $1.57 (unchanged)

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