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

Class III milk futures ended the week on a positive note with the Dec12 through Dec13 contracts posting gains of between 1 and 47 cents, despite unchanged spot cheese prices. The first quarter of 2013 futures pack average price settled Friday at the price of $18.22, gaining 34 cents on the day, while only posting a week-over-week gain of 7 cents.

Milk supplies are increasing in the Northeast and Mid-Atlantic regions, while Class II demand has slowed as most of the holiday products have already been shipped. Milk production in the Midwest is increasing, while manufactures are hesitant to take on additional loads of milk at current price levels. Milk production in the western U.S. is increasing slowly, while still below the production levels seen last year.

The grain markets ended the week on a positive note, spurred higher by strong soybean exports and better than expected soybean crush demand. The Mar13 corn contract closed out Friday at the price of $7.30 ¾, gaining 10 ½ cents on the day, while losing a total of 6 ½ cents for the week. The Mar13 wheat contract gained 5 ½ cents on the day, while losing a total of 47 cents for the week, to settle at $8.14. The Jan13 soybean contract jumped 19 ½ cents higher Friday to settle at $14.96 with a week-over-week gain of 23 ¾ cents. There is talk of concerns relating to the South American grain crops, as wet conditions in Brazil and Argentina have delayed soybean plantings and could have a negative effect on production totals. 

We look for corn to open mixed from -2 to +3 and beans to open 5 to 10 higher.

Block cheese: $1.725 (unchanged)

Barrel cheese $1.625 (unchanged)

Grade A NFDM: $1.5575 (unchanged)

Butter: $1.595 (unchanged)

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