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

Relatively flat CME cash markets are keeping Class III milk futures in a steady to lower trading range.

The premium in spring months continues to erode, despite a potentially very firm outlook on the horizon. Wednesday’s Class III trade resulted in 2013 futures settling between 11 cents lower to 2 cents higher. The double-digit losses were seen in the May & June contracts, while both Nov & Dec managed a higher close.

For the first time in a week, CME blocks during the spot session would fall. Blocks settled down ¼ cent to $1.60 on 5 trades. Barrels finished ½ cent firmer on 0 trades. Alongside yesterday’s CME latest NDPSR whey average, released last night at 60.8 cents (-2.7 cents vs. week prior), affirming the talk of soft physical pricing and lower nearby futures months. Given that whey price and today’s spot close, that would price Class III milk at $16.58 per cwt. To give you some perspective on how optimistic Class III futures traders remain, the April through December average closed at $18.07 per cwt. yesterday.

Spot session results:

Block cheese: $1.60 (down 0.25 cent)

Barrel cheese $1.5875 (up 0.5 cent)

Grade A NFDM: $1.4975 (unchanged)

Butter: $1.63 (unchanged)

The soybean market was a drag on grains yesterday as talk of fading hog production margins in China as well as a very strong U.S. dollar seem likely to lead to a slowdown in export sales on soybeans. Along with South American harvest supplies likely to hit the market in the coming weeks, market longs are nervous. On the day, May beans lost 21.75 cents to 1447, pulling the corn market 4 lower to 710.25, while the wheat market reversed its recent trend vs. corn and beans closing up 6.5 cents at 710.  

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