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

Class III futures ended the week with the 2012 futures settling between 2 and 34 cents lower, while the first half of 2013 contracts closed between unchanged and 24 cents lower. The spot session was interesting, a bit of a rope a dope; sellers let the price move up trying to extract every penny possible from the loads they had for sale. And when the price rallied, the sellers brought their excess product to the market, allowing spot prices to settle well off their session highs, leading futures to much of the same with more downside bias ― we broke $2 and we broke…. 

The fourth-quarter futures pack average price fell 24 cents on the day to close out at $20.22, yet still managed to gain 3 cents for the week. The selloff in the futures market was triggered by the action within the spot cheese session, as the blocks were unable to hold their one-penny gain, trading back lower to unchanged into the close. 

We look for the Class III futures market to start the week with higher prices.

The U.S. dairy cow slaughter for month of August totaled 275,300 head, up a whopping 35.35 percent from the month of July and up 12.6 percent over the same period last year. Through the month of August for 2012, the total number of head slaughtered stood at 2.0375 million, 6.7 percent more than for the same period in 2011.

The grain futures markets ended Friday with higher prices across the board, thanks to a flurry of end of session buying after market participants had an opportunity to digest the results of Informa crop estimates report. 

The Dec12 corn contract moved 2 ¼ cents higher to $7.48 ¼, yet lost a total of 33 ¾ cents for the week. The Nov12 soybean contract managed to gain just 3 cents to $16.21 ¾, while fell a massive $1.17 ¼ throughout the week of trade.  The heavy selling in the grain markets last week may have subsided on Friday, but the corn and soybean markets remain especially susceptible to further price declines, as both remain technically weak while the harvests continue to chug along well ahead of last year’s pace. 

The Informa report pegged total corn production at 11.092 billion bushels, 365 million higher than the September USDA estimate, with an expected yield of 126.6 bushels per acre. Soybean production is estimated to be 2.664 billion bushels with a yield of 35.2 bushels per acre, 30 million more than expected by the USDA.      

Look for corn to open slightly lower and for beans to open 12 to 15 lower.

Block cheese: $2 (unchanged)

Barrel cheese $1.96 (up 2 cents)

Butter: $1.89 (unchanged) 

Grade A NFDM: $1.69 (unchanged)

These data and comments are provided for information purposes only and are not intended to be used for specific trading strategies. Commodity trading is risky and FCStone Group, Inc., INTL FCStone Inc., and their affiliates assume no liability for the use of any information contained herein. Although all information is believed to be reliable, we cannot guarantee its accuracy and completeness. Past financial results are not necessarily indicative of future performance. Any examples given are strictly hypothetical and no representation is being made that any person will or is likely to achieve profits or losses similar to those examples. References to and discussions of exchange traded products are made solely on behalf of FCStone, LLC. References to and discussions of OTC products are made solely on behalf of INTL Hanley, LLC, and OTC products are only available to eligible counterparties.