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

Class III futures for 2012 settled with mixed results with prices between 1 penny lower and 43 cents higher. The fourth-quarter futures pack average price was able to gain 33 cents on the day to close out at $20.19 and with a gain of 57 cents for the week. The surge in the Class III market was sparked by the increases in both the spot cheese market Friday, which was the fourth consecutive bullish trading day. 

The bullish market sentiment is a continuing effect of milk production concerns due to the weather and feed cost issues of the summer carrying over into the fall. We expect the Class III market to start the week with continued gains as the bull market looks to keep its footing.

The grain futures ended Friday with mixed results, as the corn and wheat markets moved higher, while the soybeans’ prices slipped lower. The Dec12 corn futures settled up 8 ¼ cents to $7.82, while losing 17 ¼ cents on the week. The Nov12 beans fell 8 ¼ cents to $17.39, but managed to gain 2 ½ cents for the week. The Dec12 wheat contract increased 22 ¼ cents to $9.24 ¼, putting the contract up 19 ½ cents higher for the week. 

The grain complex is a difficult one to determine price direction for currently with seasonal pressure, harvest pressure and fund length the driving factors for the bear argument, while poor yield results thus far, a lack of any real demand cuts thus far, and a weak U.S. dollar make the argument that prices, in fact, need to ensure we do not run out of product for the coming year.

We look for corn to open 10 to 15 cents lower and for soybeans to open 27 to 33 lower.

Daily CME spot market prices:

Block cheese: $1.8725 (up 1.75 cent)

Barrel cheese $1.8275 (up 1.5 cent)

Butter: $1.85 (up 0.5 cent) 

Grade A NFDM: $1.69 (unchanged)

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