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

The Class III futures ended the week on a mixed, but mostly positive, note as the 2012 contracts settled 10 and 15 cents higher, respectively. While in 2013, the futures settled between 10 lower and 16 higher. 

The negative price action in the 2013 contracts occurred within the July through December contracts, down between 2 and 10 cents, while the January through June contracts closed between unchanged and 16 higher. The first quarter of 2013 futures pack added 6 cents on the day to close out at $19.18, though lost a total of 7 cents for the entire week. 

The Class III futures should see overall bullish price action in the near future, though don’t expect this to occur in a steady, orderly fashion. Milk production in the state of California, the number one dairy state in the nation, was down by 3.9 percent for the month of September year over year, with a total of 3.18 billion pounds which has hampered cheese production in the area, down 6.1 percent year over year.  Not every state has suffered a similar fate, though overall production still remains a concern.

The grain complex sold off Friday as the release of the Informa production estimates reinforced the bearish perception that this year’s crops are in better shape that predicted earlier this growing season. Informa estimated the corn’s crop production to total 10.738 billion bushels versus the most recent USDA estimate of 10.706 billion. The corn yield was pegged at 122.4 bushels per acre versus the USDA’s 122.0. For the soybean crop, production was estimated to be 2.925 billion bushels versus the USDA’s estimate of 2.860. Soybean yield was predicted to be 38.6 bushels per acre, 0.8 bushels higher than the estimate produced by the USDA.  

FCStone’s crop estimate released last Thursday pegged corn production at 10.881 billion bushels with a yield of 124.0, while for the soybean crop production was estimated at 2.959 billion bushels with a yield of 39.1 bushels per acre. 

On Friday, soybeans led the way lower as the Jan13 soybean contract fell 33 ¼ cents to $15.26 ¾, while shedding a total of 37 cents for the week. The Dec12 corn contract dropped 11 ¼ cents lower to $7.39 ½, yet still managed a gain of 1 ¾ cents for the week. 

Market participants will keep a close eye on the weather situation in South America, as heavy rains may divert corn plantings toward soybeans, in the coming days to guide trading activity.  

This morning, we look for corn to open mixed from -2 to +2 and for beans to open 8 to 12 lower.

Block cheese: $2.11 (unchanged)

Barrel cheese $2.08 (up 8 cents)

Butter: $1.8875 (down 0.25 cent) 

Grade A NFDM: $1.57 (up 1 cent)

These data and comments are provided for information purposes only and are not intended to be used for specific trading strategies. Commodity trading is risky and FCStone Group, Inc., INTL FCStone Inc., and their affiliates assume no liability for the use of any information contained herein. Although all information is believed to be reliable, we cannot guarantee its accuracy and completeness. Past financial results are not necessarily indicative of future performance. Any examples given are strictly hypothetical and no representation is being made that any person will or is likely to achieve profits or losses similar to those examples. References to and discussions of exchange traded products are made solely on behalf of FCStone, LLC. References to and discussions of OTC products are made solely on behalf of INTL Hanley, LLC, and OTC products are only available to eligible counterparties.