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

We have seen some speculative buying following the headlines of milk being the best-performing commodity of 2011, but the industry seems a bit more bearish than anything to us.  Farmers are looking to take some price risk off the board, but there doesn’t appear to be much worry from either the buyer or sellers. Prices started weak yesterday and, although they fluctuated off their lows, most months ultimately sank back to them after spot despite block price increases, as focus seemed to shift to a correction of the spread as opposed to overall market strength. After a year of some volatility, cheese prices actually look to us to be at some sort of equilibrium point right now. Market is in balance to start the day. 

Wednesday was an in-between day for grain traders. And the general market, with the looming weather concerns in South America and the increasing strength of the dollar, seemed to be in somewhat of a holding pattern. They were either down a quarter to a ¾ on the day, and they danced around the opening prices depending on which rumor they had heard last. The key triggers for these prices looks to be how much rain comes within the next few days and how much crops will rejuvenate. Combined with the international monetary problems, it should be interesting to watch play out into the weekend.  March corn closed at 6.58, unchanged on the day. Soybeans were up anywhere between 1 and three cents well into 2012. It continues to be mixed news from South America with better rains for parched Argentina areas, but that shift causing Brazilian areas to become dry. There still seems to be no end in sight from the current forecasts.

Weaker equities and a stronger dollar once again on the previously mentioned EU banking concerns have the grains set to open lower. We look for corn to open 6 to 8 cents lower and for beans to open 10 to 13 lower.

Daily CME spot market prices:

Block cheese: $1.58 (up 1.75 cent)

Barrel cheese $1.5775 (down 0.25 cent)

Butter: $1.60 (unchanged)  

Grade A NFDM: $1.45 (unchanged)

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