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

Volume hath returned, but price movement remained out of reach in Class III. After the lowest volume futures since June 10 (431), we bounced back with over 1k contracts traded. Prices started out firm, but backed off and failed to find price movement from the rising barrel prices.  Maybe it was because people felt barrels only moved up in an effort to bring the block/barrel spread in line; maybe it was because of “who” people thought bought or rather didn’t buy spot cheese. In the end, what was certain was that there was no force in either price direction and settlements were an unenthusiastic couple cents up to a couple cents down.

Commercial disappearance numbers showed easing, but still remained above historic norms. The belief in the industry seems to be that there is a lot of pent-up domestic demand just now starting to be unleashed as prices show some signs of softens.

On the hurricane front, things are almost back to normal and in most areas are back to normal; the impact to milk pickups and cheese production should be noted as minimal at most.

We look for a potential continued bounce up in milk/cheese prices, short term, but remain more bearish of the dairy markets as we wrap up summer.  

Corn: Rains have been hitting bit it looks like it is likely to dry up again soon. Yields are still in concern range, but there needs to be fresh news to feed the bull if it is to continue raging. Outside market influences are erratic as well; crude has been down and up every day this week.

Most forecasters see moderating temperatures and possibility of moisture relief in the Midwest next week. Both the 6-10 and 8-14 day forecasts include better chances for rain in parts of the region. However, traders and farmers want to see real rains not just forecasts.

Farm Futures Magazine estimated that U.S. corn acreage could reach 93.87 million acres in 2012, according to an online farmer survey, which would beat the previous record of 93.87 million acres in 2007.  It’s a 1.7% increase from the current year’s 92.3 million acres planted area. However, soybean acreage was seen at 76.9 million, up more than 2% from this year’s 75.0 million, and all wheat area was estimated at 58.6 million, up almost 4% from this season’s 55.2 million acres.

This morning, we look for corn to open 6 to 8 cents lower and soybeans to open 10 to 12 lower

.Daily CME spot market prices:

Block cheese: $1.79 (unchanged)

Barrel cheese: $1.73 (up 2.5 cents)

Butter: $2.09 (unchanged)  

Grade A NFDM: $1.51 (unchanged)

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