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

Class III futures were nearly silent over managing just a handful of trades leading into the day session. Seven hundred and fifty-eight contracts managed to trade in a mixed session that saw only the August contract settle with a loss, dropping just a penny. The remainder of the 2012 contracts settled between one and 17 cents higher with June leading the way higher. The trading volume tapered off significantly past the August contract, as the market was content to remain within yesterday’s trading range for most of the monthly contracts. 

Spot cheese session did little to sway traders, as both the blocks and barrels closed out the day unchanged with just a single trade posting in the barrels. The cheese futures traded in much the same fashion, failing to post any big moves either direction. The cheese market finished mixed with settlement prices ranging from down ½ cent in September to up 1.6 cents in June. Could this be the calm before a storm?  Only time will tell, but these markets look poised for more volatility in the coming days.  With supply/demand fundamentals remaining largely bearish, but technical indicators ― the calculus of charts ― looking less so, we expect some turbulence. 

A hectic day for the grains markets as the entire complex came into the day posting higher pricing established in the overnight session on concerns of a dry forecast for the U.S.  Once the market opened for the day session, the grains gave back much of the overnight gains, with corn actually turning negative, if but only for a moment. The July corn closed out the day up 14 ¼ cents at $5.97 ¼, triggered by technical buying interest and strong feed demand.  The July beans jumped 26 cents higher to settle at $14.13, paving the way for the surge higher in the grain complex. The July wheat closed 10 ½ cents higher at $6.08 ½. 

In addition to the record or near record pace of corn and bean planting, anecdotal reports from growers describe good populations, advanced crop development and excellent growing conditions. Yet prices were higher in the face of good crop news. Traders will be keeping close watch on the weather forecasts over the next couple weeks as continued, above normal temperatures will cover much of the U.S. 

We look for corn to open 2 to 5 cents lower and soybeans to open 12 to 17 lower. 

Daily CME spot market prices:

Block cheese: $1.50 (unchanged)

Barrel cheese $1.45 (unchanged)

Butter: $1.3525 (up 1.25 cent)  

Grade A NFDM: $1.1225 (unchanged)

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