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

Class III succumbed to sell-side pressure to start the first full week of 2013. While the spot block price remained unchanged at $1.7600 (as it has since Dec. 31), the trade focused on barrels, which fell 3 cents to $1.6900. Additional pressure came from weakness in dry whey futures and, by the end of the day, February Class III led the declines to the tune of 36 cents lower on the day. 927 contracts changed hands Monday as prices are in a full retest of their recent lows.

Although demand for cheese remains soft so far this year, we’ve heard reports of fluid milk tightening already this week as schools gear up for classes. But we don’t expect that market bulls will lean on that too hard just yet as it’s the demand ― or lack thereof ― that will drive the near-term price direction. With little in the way of aggressive buy-side activity, both Class III and cheese prices are poised for more weakness today. 

Spot session results:


Block cheese: $1.76 (unchanged)

Barrel cheese $1.69 (down 3 cents)

Grade A NFDM: $1.5575 (unchanged)

Butter: $1.485 (down 1.5 cent)

Early rallies faltered early yesterday before the grain complex regained its solid footing underpinned predominantly by solid bean price strength. Bean export inspections paved the way as several analysts noted alongside them that there are expectations for another export sale of size to be announced this week. Volume in yesterday’s session was fairly light, and we’d expect the bulk of this week’s activity to be ho-hum on light volume in advance of Friday’s big WASDE report. 

We continue to see that speculative money has run to the sidelines in the grain complex. In fact, net long positions by managed money are now the lowest since June 2012.  If the speculators continue to liquidate and/or go short (sell) the grain complex, then rallies moving forward will be limited and sold aggressively. On the other hand, should the story for grains change in the near term, which would include a deterioration of the good weather in South America as well as in the U.S.,  the speculator will have plenty of buying power on their side to stage a price rally. 

We look for corn to open steady to 3 cents lower and beans 1 to 5 lower.

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.