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

Class III futures continued a somewhat ho-hum trading session in the face of another round of bidding spot cheese prices higher Thursday. The November contract was able to break away to the upside, eclipsing the $21 mark again and closing 25 cents higher on the day. But beyond the spot month futures prices were only reluctantly higher. The bulk of the trading volume was relegated to the November and December contracts, which traded 1,060 of the 1,414 contracts and accounted for approximately 75 percent of the total trading volume for Class III. 

The reluctance of futures to follow spot bids with enthusiasm is likely two-fold. For one, we’ve only traded a single load of cheese all week. We can speculate as to how much they may need at the exchange, but until they actually have to absorb multiple offers of cheese we don’t truly know how deep their bids are. Secondly, with the international price of cheddar being reported only slightly higher at a shade under $1.80 (and GDT projecting even weaker prices) there continues to be a healthy dose of skepticism surrounding demand above $2.00. This is to say nothing of the idea that as we close out October, many buyers expect that a period of quieter, post-holiday demand may provide buying opportunities just around the corner. While history would favor such a view, we continue to hear of strong sales for now and expect that to have a hand in moving both Class III and cheese futures prices higher into next year for the time being.

No news is bearish news for the grain markets, and as the bin doors close the strong cash price was not enough carry grain and soy prices higher Thursday. Moreover, prices have really been choppier this week. Users are not very profitable at current levels and farmers are not enticed to sell a sluggish market. Corn export sales released yesterday continue to disappoint with net sales of 142,300 tons down 15 percent from the previous week, but up 14 percent from the prior four-week average. Soybeans were a bit less than expected with net sales totaling 522,200 tons, unchanged from the previous week and down 33 percent from the prior four-week average.

Look for the grains to open with a downward bias this morning. 

Block cheese: $2.09 (up 3.5 cents)

Barrel cheese $2.06 (up 3.5 cents)

Butter: $1.89 (unchanged) 

Grade A NFDM: $1.56 (unchanged)

These data and comments are provided for information purposes only and are not intended to be used for specific trading strategies. Commodity trading is risky and FCStone Group, Inc., INTL FCStone Inc., and their affiliates assume no liability for the use of any information contained herein. Although all information is believed to be reliable, we cannot guarantee its accuracy and completeness. Past financial results are not necessarily indicative of future performance. Any examples given are strictly hypothetical and no representation is being made that any person will or is likely to achieve profits or losses similar to those examples. References to and discussions of exchange traded products are made solely on behalf of FCStone, LLC. References to and discussions of OTC products are made solely on behalf of INTL Hanley, LLC, and OTC products are only available to eligible counterparties.