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

The talk of the town is today’s GDT auction. Will continued gains spur further U.S. price appreciation or will GDT buyers back off given how high prices have gotten ― and, if so, could that send U.S. price running for shelter?

Yesterday, blocks were unchanged and barrels were up a cent, and yet Class III and cheese futures were lower. The recurring theme of late was sustained yesterday:  price decreases are on lower volume and price increases are on stronger volume. Price probably recoiled a bit yesterday primarily because of caution ahead of GDT alongside falling corn prices. Look for that to not be a trend and rather a one-off with today allowing for a breakout in volume and perhaps price as well. 

Spot session results:

Block cheese: $1.6925 (unchanged)

Barrel cheese $1.6075 (up 1 cent)

Grade A NFDM: $1.59 (up 3 cents)

Butter: $1.63 (unchanged)

In the grain complex, another day and another 40(+) cents… in old crop corn price losses.

We continue to ask the question, what is cheap corn and the answer keeps coming back to us a shade off of $4.50. Well, Dec13 is at about $5.30, and if expensive corn is $6.50 or $7.50, holding out seems very risky to us and we remember this from last year. Buying min/max’s or calls (upside insurance) seems practical as sub-$6 corn alongside $18.50-$19.50 milk will make some real money for the dairy producer community as a whole. Look for corn to snap out of its downfall and bounce back here soon if not today.

This morning, we look for grains to open higher.

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