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

Class III prices opened mixed and remained that way throughout the day. The spot block price stopped falling after the recent sharp decline and that was enough to bring some moderate support to the nearby contracts, despite a half-cent decline on barrels. Nov gained 10 cents and Dec was up 18, while 2013 futures were mixed from -10 to +4 on the day. Volume remains strong throughout the complex with each month in 2013 trading at least 33 contracts.

It seems now that the market is likely to begin trading a tight range on spot cheese perhaps bouncing moderately, but we do question just how much further the market can fall despite the typical seasonal trend to do so. Most have expected that cheese could fall to $1.70, but likely not much below, and the fact that we’ve got to the low $1.80s so quickly certainly heightens the fear that prices could fall further than expected.

In the grain complex, the markets closed mixed with corn up 4 cents at 722; beans up 3 at 1408, both bouncing in an unimpressive fashion, and wheat down 6.75 cents at 851. News was very light on the day with South American weather and forecasts remaining ideal, while the bean harvest here advanced to 96 percent complete. The weekly winter wheat condition ratings continued to decline coming in this week at 36 percent, down from 39 percent last week and there is little relief in the forecast as rains are still lacking.

We look for corn to open 1 to 3 cents higher and soybeans 8 to 15 higher.

Block cheese: $1.8575 (unchanged)

Barrel cheese $1.8275 (down 0.5 cent)

Butter: $1.89 (unchanged) 

Grade A NFDM: $1.575 (unchanged)

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