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

Class III futures came into the day firm, supported by a strong overnight session and those gains held right through the day and into yesterday’s close. Buyers were chasing sellers uphill all day long, supported by gains in just about every sector of the dairy complex. Early morning double-digit Class III gains were upheld when the spot markets moved higher on firm volume for both the block and barrel. Higher nonfat dry milk and spot butter pricing continued to add fuel to Class III futures buying, as commercial orders spread well out through 2013. And, 2012 months more than covered earlier week losses, with the fourth quarter settling at a fresh record high average price of $20.47 per cwt, +37 cents on the day.

In the 1st quarter of 2013 prices settled 27 cents higher at $19.60 per cwt. 

The Class III market has been extremely comfortable of late, trading back months in line with the spot markets where, as in years past, often times there would be significant divergence between deferred futures and the spot market movement with the spread between spot and deferred contracts reaching as much as a $4 per cwt. differential. This time around, the rising tide is lifting all ships as long-term fears seem to be driving the gains in both spot as well as deferred 2013 futures contracts. This Class III bull is on parade and is showing zero inclination of weakness.

The grain markets were led higher by the wheat complex Wednesday as talk of an end to Russian exports potentially to come as soon as Friday morning triggered a sizeable rally. Wheat closed up 30.75 cents in September at 885.50, dragging December corn up 18 to 8.1350 and Nov beans up 30.75 cents to 17.53. Exports are shut down due to Hurricane Isaac and rains could potentially do some damage to crops in the Delta, but that seems to be balanced out by rains tracking into the Midwest to potentially help with late-season pod filling. Next week will bring private estimates ahead of the September 12th USDA report and the market is still dealing with a wide range of final estimates, leaving a lot of room for potential change in the upcoming reports.

We look for corn to open mixed -2 to +2 and for beans to open steady to 4 lower.

Daily CME spot market prices:

Block cheese: $1.87 (up 1.75 cent)

Barrel cheese $1.81 (up 1 cent)

Butter: $1.84 (up 2 cents)  

Grade A NFDM: $1.70 (up 3.5 cents)

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