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

The bull trend just won’t stop. Spot cheese prices saw blocks climb 2.75 cents, while the barrels surged 7.25 to a fresh 2013 high. There had been talk that the block market was snug due to export demand, but now it seems to be that milk is a bit tight all around. And with the significant discount on Class III relative to Class IV, the market is suddenly trying to play catch-up to get a few loads swinging back the other way. It seems very little spot cheese is available. And while margins are improved and look good on the forward curve, the milk production spigot can’t turn on overnight. It seems likely that a seasonal pullback in domestic demand can allow the bull trend in the spot markets to come to an end, but a price pullback in the short term is looking more and more remote.

Spot session results:

Block cheese: $1.9475 (up 2.75 cents)

Barrel cheese: $1.885 (up 7.25 cents)

Grade A NFDM:  $2.03 (up 1.25 cent)

Butter: $1.64 (unchanged)

The grain markets traded to a mostly higher close in what looked to be a corrective spread type trade. On the day, March corn finished up 5.25 cents at $4.3650 and soybeans were 9.75 cents higher at $13.2950.

The market continues to be fearful of fund rebalancing on the corn market in particular as we head toward the end of the year, Friday’s CFTC report showed funds net short 120,000 contracts. Most of this concern should dry up by the end of the calendar year just prior to the stocks report and Jan. 10 S & D. December’s S & D tables will be released next Tuesday, but the market isn’t expecting any major changes. The market will be closely watching the weekly export sales report later this morning for further signs of Chinese soybean purchases, and to this point the spreads and basis activity is too reminiscent of a year ago when backwardation held until delivery neared and prices would spike. We saw that in December and our feeling is you have to continue to look for that until the market shows us otherwise. 

We look for grains to open lower across the board this morning.

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