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

A steady spot cheese market and a steady supply of largely bearish sounding news for the Class III market were thwarted Thursday by sharply higher dry whey futures prices. 

Class III held its ground, closing only pennies lower during another sub-1,000-contract trading session as dry whey prices rallied for the first time in weeks, closing between 1.75 and 2.65 cents higher from July to December on nearly 100 contracts of trading volume. What gave the dry whey market a boost?  There has been some anecdotal chatter about renewed interest in exportable dry whey ― though we’ve yet to see any rubber really hit the road.

So, Class III remains in the cross-fire between weaker spot prices, quiet demand, abundant milk supplies, on one hand, and uncertain export potential for Q3 contracts and dry whey prices that we expect to buoy some support heading into June. In the short term, we expect more Class III price weakness, but it is possible we are putting in a base at these levels with the June and July contracts still holding over their recent lows. 

Spot Session Results

Block cheese: $1.74 (unchanged)

Barrel cheese: $1.7075 (unchanged)

Grade A NFDM:  $1.68 (unchanged)

Butter: $1.54 (unchanged)

The grain complex tried to rally Thursday, but couldn’t keep the gains amid calming fears of wet weather.  The markets seem to have made the appropriate adjustment for soggy, unplanted fields for the time being.  Early estimates were for a loss of 1-2 million corn acres. By Wednesday and Thursday, that number was more like 3-4 million. We’ll wait for the June estimates, but for now we expect a loss of buy side appetite at current levels without any fresh demand news. And demand clearing prices do not seem to be of the $6.00 variety right now for December corn.

Weather forecasts have not changed much as models show another 1-2” rain for most of the Midwest over the next three to four days, followed by a quick two- to three-day break, and then another system is expected to move in from the Northwest on Tuesday. Extended outlooks have moved to normal precipitation, but anything on top of what we have is too much in the north central Corn Belt.

This morning, we look for corn to open 1 to 4 cents higher and beans 6 to 10 higher.

The trading of derivatives such as futures, options, and swaps may not be suitable for all investors. Derivatives trading involves substantial risk of loss, and you should fully understand those risks prior to trading. Any reference to past performance is not indicative of future results. All references to futures/options trading are made solely on behalf of FCStone, LLC. All references to swap execution and bi-lateral swaps are made solely on behalf of INTL Hanley, LLC. FCStone, LLC will clear swaps when applicable. Swaps are only available to eligible counterparties. All observations of economic, political and/or market conditions are not intended to refer to any particular trading strategy, promotional element or quality of service provided by INTL FCStone Inc. and its subsidiaries and should be construed as market commentary. All recommendations to buy or sell a specific derivative or forecasting statements regarding market activity and the pricing thereof should be construed as a solicitation in any jurisdiction in where such an offer or solicitation would be legal. Proper context and guidance including but not limited to the particular trading objectives, financial situations and the needs of the intended audience were taken into consideration when this recommendation was prepared. Contact your account representative for specific advice to meet your specific trading preferences or goals. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by INTL FCStone Inc. and its subsidiaries. Sources of information believed to reliable were used in preparing such observations, and no guarantee or representation regarding the accuracy of those sources has been made. INTL FCStone Inc. and its subsidiaries are not responsible for any redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material.