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

The Class III futures market finished Friday’s trade with a total of 625 contracts changing hands with mixed pricing results. The Feb13 and Mar13 contracts posted the lone gains of a penny apiece; Oct13 remained unchanged, while the remaining contracts fell lower by between 2 and 8 cents.  The 2013 second-quarter futures pack fell 6 cents lower on the day to finish the week at the price of $17.59, while dropping a total of 7 cents lower from the week prior.

Earlier in the week, the USDA Milk Production report for the month of January was released with the posted results slightly bullish when compared with trade expectations. For the top 23 states, total milk production increased by 0.6 percent year over year, while up 1.3 percent over the month of December. Trade expectations were for the year-over-year increase to total 1.45 percent and the gain over December to come in at 2.18 percent. For the entire U.S., total milk production in the month of January increased by 0.49 percent over the same period the year prior versus the expectation of a 1.32 percent gain. Gains versus the month of December posted at 1.63 percent when expectations were for a gain of 2.44 percent. When compared with expectation, the report looks slightly bullish, though highlights an underlying trend of an abundant and growing milk supply, which continues to weigh on Class III prices.

Spot session results:

Block cheese: $1.6275 (down 0.75 cent)

Barrel cheese $1.63 (unchanged)

Grade A NFDM: $1.505 (unchanged)

Butter: $1.59 (down 1 cent)

Friday’s grains trade resulted in bearish price losses for the complex.

The Mar13 corn contract fell by just ½ cent during Friday’s trading session to settle at the price of $6.90 ¼, while dropping 9 ½ cents lower week over week. The Mar13 soybean contract fell 26 ½ cents in a volatile session, after starting the day with double-digit gains, to settle at $14.61 ¼, 36 ¾ cents lower than week prior. Ethanol production has increased over the past few weeks, though remains at levels much lower than year ago levels. Corn weekly exports posted better than expected at 15 million bushels, combining old and new crop, with the high end of expectations at 11.8 million bushels. The soybean market started Friday with bullish price action, aided in part to the scheduled strike in Brazil by dockworkers, though now Tuesday’s walkout has been canceled. The positive price action in the beans gave way to heavy selling; funds estimated to have sold 12,000 contracts in the latter half of the day, while export sales were abysmal. 

This morning, we look for corn to open mixed and beans to open 3 to 5 cents higher.

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