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

Class III and cheese futures rallied sharply Thursday, regaining as much as 75 cents on front-month Class III and over four cents for June cheese. This begs the question we’ve belabored with customers over the past 24 hours: Have Class III and Cheese futures turned the corner back to bullish or is this a bear bounce? While we believe that there are some longer-term fundamental issues (weather, demand, etc.) that will underpin our cheese market, the trading activity Thursday has earmarks of a trading “bear bounce” rather than a resumption of a bullish trend.  Bear bounces tend to be fast and furious, and they tend to follow sharp declines. Both of these characteristics have been met since Wednesday.  

But what about the vigorous bidding in spot cheese? Spot cheese is the less expensive alternative to futures, so value buying on both block and barrel cheese during the spot session here in the mid-$1.70’s makes a lot of sense to us. We can see this consideration of value by buyers in the narrowing of the spread to a mere 1.25 cents over the past few days under good trading volumes for both (24 loads of block and 17 loads of barrels have changed hands here in Chicago this week).  That said, we expect a continued two-sided trade to the spot market as we continue to hear of ample fresh block and barrel cheese in the country that we expect will make its way to the exchange.

Although Class III and cheese futures were slightly lower overnight, there may be some additional gains to futures early today. But we expect that the futures are encroaching on having over-bought this bounce and expect to see some futures selling headwinds in the immediate future ― today or early next week ― as the final hallmark of a bear bounce is its ability to fade nearly as fast as it begins. 

Spot session results:

Block cheese: $1.765 (up 1 cent)

Barrel cheese $1.7525 (up 2.25 cents)

Grade A NFDM: $1.68 (unchanged)

Butter: $1.60 (up 0.5 cent)

Corn fell Thursday as traders focused on above normal temperatures and little rain, which is allowing planters to roll with abandon in many areas of the Corn Belt. Corn traders have lost sight of tight old crop supplies in favor of weather, but not the bean traders. Tight old crop soybean supplies underpinned both soybeans and soybean meal Thursday. Both corn and soybeans are modestly higher this morning, and we expect a choppy trade into the weekend. 

This morning, we look for corn open 2 to 4 cents stronger and soybeans 5 to 10 higher.

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