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

Class III prices traded mixed throughout the session yesterday as volume picked up to over 1,500 contracts. Early in the session, prices worked their way higher ahead of the spot market. The spot market ticked up ¼ cent on the barrel and the blocks were unchanged. With the gain in the spot market, and the staggering jump in contract two on GDT cheddar, it looked like the market may have the ammo needed to break more levels of technical resistance, but by midday buying faded.  Prices finished mixed, led to the downside by May and June, each losing 22 cents, while other months ranged from -6 to +10.

We expect to see some type of movement either confirming a breakout or a continued pullback as we close out the week. With fundamentals continuing to be mostly bearish, we expect that move to be to the downside though some chatter has emerged that the next spot move will be to the upside. Backing up our feeling of lower prices to come is that, once again, as heavy volume came in, it led to mostly lower prices on the day and open interest moved in kind, increasing by 178 contracts. Only April declined in open interest.  

Grains continued to work their way higher throughout most of the day, led by stronger old-crop corn contracts. Basis levels continue to be very strong with last week’s report indicating tight stocks while farmers turn their attention toward planting. Perhaps basis can get grain out of the bin, but we have our doubts that will happen given the seemingly inevitability of continued tightness and justification for holding onto grain given by last week’s report. Soybeans, however, did decline and prices across the board closed well off their highs as a strong U.S. dollar and weak outside markets weighed. Weather from here forward will likely be the most important influence as the soybean new crop S & D cannot afford any yield losses and old-crop corn could really run away if any issues are perceived with the early new-crop corn harvest.

We look for corn to open mixed and for beans to open 2 to 3 cents lower.

Daily CME spot market prices:

Block cheese $1.49 (unchanged)

Barrel cheese $1.4625 (up 0.25 cent)

Butter:  $1.455 (unchanged)  

Grade A NFDM: $1.2675 (unchanged)

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