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

The Class III futures market posted a total of 1178 trades in a mixed trading session. The 2013 futures settled between 21 lower and 4 higher, with the greatest losses coming in the February and March contracts. The 2013 first-quarter futures pack average price settled at $17.79, down12 cents for the day and down 33 cents for the week. 

Milk production across much of the nation, with the exception of Florida, remains steady to increasing. In portions of the central U.S., milk production is running above expectations, while out in California production is still running behind year-ago levels as producers continue to contend with high input costs. According to the USDA’s WASDE report released Friday, 2013 milk production is anticipated to reach 199.9 billion pounds, up fractionally from the previous estimate.

Spot session results:

Block cheese: $1.72 (unchanged)

Barrel cheese $1.6725 (down 1.25 cent)

Grade A NFDM: $1.535 (unchanged)

Butter: $1.455 (up 0.75 cent)

The grain complex ended Friday’s trading session with mixed results as traders responded to the release of the USDA’s crop production report. The Mar13 corn contract gained 10 cents for the day to settle at $7.08 ¾, while adding a total of 28 ½ cents over the week. The Mar13 soybean contract lost 6 ½ cents on the day to close at $13.73 1/4, while still managed to gain a total of 6 cents over the week prior. The Mar13 wheat contract gained 10 ¼ cents Friday to settle at $7.54 ¾, while adding a total of 7 ½ cents for the week. Corn production was forecast at 10.780 billion bushels, up 55 million bushels from the USDA’s November report, but with the corn ending stocks estimate falling to 602 million bushels which represents only 5.3% of annual domestic corn needs. Corn exports are estimated to reach only 950 million bushels, the first time since the 1971-72 marketing year that exports are expected to total less than one billion bushels. Dairy producers will face stiff competition for feed from livestock producers, as the feed demand estimate was increased by 300 million bushels. The soybean production estimate was increased to 3.015 billion bushels, versus 2.971 billion bushels in the previous report, though current total U.S. demand estimates could lead to extremely tight old crop stocks.

We look for corn to open 10 to 15 cents higher in old crop 2 to 5 higher in new crop, and beans to open 12 to 16 higher.

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