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

Spot cheese prices continue to climb the wall of worry, yet still remain entrenched in September’s price range. 

With respect to CME spot block’s, prices are now up 8.5 cents vs. the lowest traded loads last month (on 9/26) and only 1.5 cents under the highest-priced product that changed hands last month (on 9/13). Until we witness a breakout of that range, futures trading is expected to be flat with a higher bias. 

The consensus amongst our contacts has changed slightly over the last week. End-users are still sitting on decent inventories yet additional purchases have been delayed due to price increases. On one hand, their expectations of a return to sub 1.70 cheese have failed to materialize yet, on the other hand, price increases have appreciated their inventory values. Physical sellers are witnessing milk intakes slow down and holiday demand pick up. Without the orders in hand, producers are less than willing to overproduce.

Spot session results:

Block cheese: $1.825 (up 1 cent)

Barrel cheese: $1.78 (unchanged)

Grade A NFDM:  $1.845 (unchanged)

Butter: $1.5275 (down 1.5 cent)

The grain markets traded to a mixed close with spread trading seemingly carrying the price movements. The funds have been short of corn and long of soybeans, while closing out of short positions on wheat market ― and that seemed to be driving the activity yesterday. The corn vs. wheat spread had been trading around the $2.50 level for some time, but it broke 13.25 cents yesterday as those spreads were liquidated; it closed at $2.4225. The trade has been closely monitoring the Nov bean – Dec corn x 2 spread and it has long been chopping around the $4.00 mark, but that spread dropped by 19 cents yesterday to $3.80. September soybean crush was reported at 108.7 vs. 119.7 last year as tight supplies led to a sharp drop in crush. Despite the slow crush, the market continues to get reports of better-than-expected soybean yields.

This morning, we look for corn and wheat to open steady to slightly higher, soybeans up 3 to 6 cents and meal steady to 1.5 higher.

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