Class III futures settle mostly higher

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

Class III gained a little steam to start the week yesterday, with futures settling mostly higher through 2014 ― anywhere from -2 to +15 on the day.

While Class III saw some relative strength, the spot market was mixed on no trades, with blocks up ¼ cent and barrels down ¾ cent on the day. Yesterday’s firming Class III futures ― particularly in the second half of 2014 ― now puts the Jan through Dec pack at new highs, roughly trading near $17.66. The nearby contracts (Jan., Feb., March) are in a full re-test of their Dec. 4, 2013 high-trading mark, but have failed to make new highs as of this morning.

With the block/barrel spread now at 10 ½ cents, the questions we are asked remain whether blocks move down to narrow the spread or if barrels will move higher? The spread itself is not incredibly unusual during the holiday season. The unusual part, however, would be to expect another wave of price increases for spot cheese or a further widening of the spread this time of year. It can happen, but we’d expect to see cheese free up to come to the exchange before 2013 closes. 

Spot session results:

Block cheese: $1.9275 (up 0.25 cent)

Barrel cheese: $1.8225 (down 0.75 cent)

Grade A NFDM:  $2.09 (up 1 cent)

Butter: $1.55 (down 2 cents)

Corn closed slightly lower yesterday, down 2 ¼ cents as traders remain nervous over China rejecting U.S. corn. USDA Agriculture Secretary Tom Vilsack will travel to China Thursday for GMO talks.  Corn market sentiment is extremely bearish. Soybean traders have been more bullish recently, but are concerned about speculative fund action heading into year’s end.

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