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

The Class III future markets settled yesterday with mixed but mostly lower prices as yet another quiet spot cheese session failed to prompt much futures buying. 

The Oct12 contract was the only contract to settle higher, gaining 4 cents to $21.05, while the Nov12 and Dec12 contracts closed down 24 and 23 cents, respectively. In 2013, the Jan13 through Sept13 contracts settled between 3 and 13 cents lower, while the fourth quarter remained unchanged. A total of 925 contracts traded hands yesterday, while 83 percent (766) of those trades occurred in the fourth quarter of 2012. 

The lack of movement and activity in both the blocks and barrels spot sessions this week has capped the recent bullish trend in the Class III market, particularly in the fourth quarter of 2012. Market sentiment seems to be that with butter and NFDM physical weakness, cheese is sure to follow shortly and Class III futures are reflecting this sentiment trading at a discount to the current spot market value. The block/barrel/whey pricing is currently showing a Class III equivalent of $21.39, while November futures closed the session at $20.71.

The grain markets started the day with steady to slightly higher prices before shedding value throughout the trading session as traders positioned themselves before the USDA WASDE report Thursday morning. The Dec12 corn contract ended the day down 5 ¼ cents to $7.36 ¾, while the Nov12 soybean contract finished down 26 ¾ cents to $15.23 ¼. The Dec12 wheat contact was able to buck the negative trend, closing up 5 ½ cents to $8.69 ¾. Funds lightened their long positions in both the corn and bean contracts, while adding wheat contracts, continuing a trend established on Monday. .

Block cheese: $2.10 (unchanged)

Barrel cheese $2.06 (unchanged)

Butter: $1.93 (down 1 cent) 

Grade A NFDM: $1.66 (unchanged)

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