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

Class III futures continued their downward slide yesterday as the July through December contracts settled between 3 and 31 cents lower, while the June contract remained unchanged on roughly 1,100 trades.  

The pressure on the Class III market can be attributed to a number of factors. 

The USDA WASDE report released yesterday posted the estimated milk production for 2013 unchanged at 201.8 billion pounds, while the 2014 total production estimate was posted at 204.5 billion pounds, an increase of 1.34 percent from the 2013 total, while the estimated average Class III price for 2014 was pegged at $17.50, down 50 cents from the predicted 2013 average price. 

Adding to the bearish case for the market was the performance of the spot cheese markets. The blocks fell 1.75 cents lower to $1.7325, while the barrels remained unchanged at $1.7725, putting the block/barrel spread at an inverted 4 cents. 

Weather conditions across the nation continue to work in favor of the market bears, as typical late-spring temperatures have failed to reach many areas of the country, particularly the Midwest, and have allowed cow comfort levels to remain high and production to continue to hum along. Until temperatures return to typical levels for this time of year, the excess milk production and slipping demand will continue to weigh on prices. 

Spot Session Results

Block cheese: $1.7325 (down 1.75 cent)

Barrel cheese: $1.7725 (unchanged)

Grade A NFDM:  $1.695 (up 0.25 cent)

Butter: $1.54 (unchanged)

The grain markets all fell lower yesterday, driven by the results of the much anticipated USDA WASDE report. The July corn contract settled down 8.75 cents to 650.75, while the December contract shed 13.25 cents to 537.50.  The July soybean contract posted a gain of just 0.25 cents to 1540.75, while the November contract lost 12.75 cents to 1314.25. 

The old crop carryout out numbers for the corn, soybeans and wheat were all higher than the average trade estimate. For the new crop corn, acres planted and harvested remained unchanged, which could/should be adjusted in the upcoming reports due to the impact of the incessant rains that have plagued the Corn Belt. New crop corn carryout was posted at 1.949 billion bushels, over 150 million bushels higher than the average trade estimate, and was responsible for the weakness within the December corn contract and its filling of the price gap on the charts down into the mid $5.30’s. If the December corn contract is unable to sustain a rally higher from this level, expect a continuing bearish trend to grip the new crop corn market with a test of support around the low $5.20’s in the coming days. The ability of the grain market to either add to or rebuff yesterday’s losses will set the tone for these markets in the coming days. Heavy rains hit the Midwest again yesterday.

This morning, we look for corn to open mixed from -2 to +2 cents and for soybeans to open 5 to 10 lower.  

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