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

Class III futures settled anywhere from -15 to +10 through 2014, with most weakness centered in the deferred months. 

This was not the case early in the session with Class III seeing modest gains across the board.  However, enthusiasm faded post-spot as both blocks and barrels failed to move higher for the first time this week. Although most of the weakness was centered in the deferred contracts, (perhaps tied to a bearish USDA report for corn?) 2013 contracts continued to run higher. October Class III, specifically, has gained nearly 46 cents this week alone. It is no secret that exports have been better than they have been in five years; however, we are hearing that interest in powder and fat are ratcheting up. Multiple overseas sources have said they are actively sourcing now. This overseas demand should help support domestic markets at least in the short term; however, there has been some concern that cheese exports will taper off in the coming months. Whether this comes to fruition is yet to be seen. Since last Thursday, the block price is up 5.75 cents at $1.8400. There have been 12 trades. The barrel price was four cents higher at $1.8125 with two trades. The spread is remains slightly outside the normal historical range of three to five cents. The technical, as we have been noting, has turned firmly bullish.

Spot session results:

Block cheese: $1.84 (unchanged)

Barrel cheese: $1.8125 (unchanged)

Grade A NFDM:  $1.83 (up 1 cent)

Butter: $1.45 (unchanged)

In the grain complex, corn prices came under pressure with the USDA confirming a record U.S. corn crop. New crop production seen at 13,843 vs. 13,763 in August with a 155.3 yield. This larger crop sets the stage for new crop-ending stocks at 1.85 billion, triple that of the ending stocks this year. As a result, we saw Dec corn down 6 ¼ cents to settle at 466 ¼. One can expect with this news traders will be looking for a significant acreage shift to soy next year. The corn vs. bean ratio, already at record-wide levels, continued to widen sharply yesterday as the soybean market closed significantly higher (36 ¾ cents November) with the USDA lowering new crop soy production estimates to 3,149 vs. 3,255 in August with a 41.2 yield. Ending stocks for the current year are projected at 125 million bushels, which may still see a smaller calculation in the Sept. 30 stocks report. We’ve heard reports that northern Iowa and Southern Minnesota may have lost up to 5 bushels per acre over just the last week.

The market will likely remain very dicey for the next couple of weeks until we start harvesting soybeans and getting actual yield reports of which is likely to determine the next dollar move on soybeans. If that move is to the downside, strange as this may sound, it may not actually pull corn lower as there are an awful lot of long soy vs. short corn positions on the books. And if beans start to fall, look for those to get unwound in a big way with the potential to actually offer some support to the corn market.

This morning, it looks like a slightly lower open across the grain complex.

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