Class III futures keep an eye on spot cheese market

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

The Class III market continued its choppy trade on fairly light volume Wednesday. Prices were higher on the overnight session, but turned lower pre-spot session. When spot opened and closed with no activity, nearby months built some strength into the close. Futures had been carrying a slight discount to the spot market and worked to close that gap after a second consecutive day of no activity. Sept through Nov contracts finished 10 to 19 cents higher with one- to two-cent gains from Dec through Feb. Meanwhile, the deferred 2014 futures contracts continued to get hit with sell side pressure and actually accounted for a far greater percentage of the daily volume than they had in previous sessions. At least eight trades took place in each 2014 contract on the day.

We would look for the Class III market to be very responsive to any movement in the spot market for the time being. With schools getting started back up, perhaps that will allow for the spot market to hold in the upper $1.70’s in the coming weeks.

Spot session results:

Block cheese: $1.77 (unchanged)

Barrel cheese: $1.765 (unchanged)

Grade A NFDM:  $1.795 (unchanged)

Butter: $1.38 (down 1.75 cent)

The grain price whipsaw continued yesterday as corn, after closing at a new low, recovered to gain eight cents on the day to $4.5525. And beans continue to find support trading to double-digit losses overnight, but recovering to settle 11.25 cents higher at $12.3900.

Farmer selling of corn has been very light and basis jumped sharply yesterday, helping to push the market higher. The market is also getting some mixed signals in regards to weather as we are unseasonably cool now, expected to warm up nicely over the next two weeks and then some early reports of frost concerns already hitting the news wire for early September. Certainly, those longer-term forecasts prove to be less-than-accurate, but in combination with light farmer selling this rally may not yet be done.

For those who have a significant amount of unpurchased grains, call options to protect against an early freeze in the coming weeks may be advisable. Please call us to discuss your specific situation.

Despite a forecast for some scattered western Corn Belt rains to help soybeans, the relatively tight S & D tables from the USDA are keeping the market moving to the upside. There is still a lot of uncertainty regarding the final production for beans, and we’ll continue to look to that market as a price driver over the coming weeks.  

This morning, we look for a slightly higher open across the board, corn steady to 3 cents higher and beans 4 to 8 higher.

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