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

The Class III market traded slightly lower on moderate volume really throughout the duration of Wednesday’s session. Slightly lower prices during the spot session as both the blocks and barrels closed lower by ½ a cent each with an offer remaining assured that prices would remain softer and that they did.

Settlements from March through December were lower by 2 to 9 cents, with one exception as June finished 13 lower. 2013 contracts were also under pressure as prices were 8 to 14 lower, mostly on offers only, from January through August. Volume dropped off along with the lack of an intraday price movement as we just cleared the 1k mark and options volume was down from over 2k to just over 600 contracts yesterday. So, while the trend is down for Class III, this latest round of selling is running out of steam at current levels.

Cold Storage Report:

In our opinion, Wednesday’s Cold Storage report was very bearish on butter prices and slightly bearish on cheese.  The annual summary showed an increase in American cheese stocks of 10.3 million pounds, while other cheese stocks were unchanged leaving total stocks up 10.3 million pounds in the annual summary. The January American cheese stocks were 612.4 million pounds showing a year-over-year decline of 4 percent, while stocks were higher by 0.2 percent over last month. We view the build in American cheese stocks as slightly bearish, despite a drawdown in other cheese. The other cheese category likely shows some good demand for pizza during the Super Bowl month, or it could be reflective of poor forward orders for February and March, triggering a slowdown in mozzarella production.  The dairy products report ought to shed some light on that in a few weeks.

Corn finished the day up 7.75 cents at 641.25, wheat up 9 at 645.75 and soybeans yanked above unchanged just before the close finished up 1.75 cents at 1278.75.

We look for corn to open mixed from 2 lower to 2 cents higher and beans to open 2 to 4 higher.

Daily CME spot market prices:

Block cheese $1.48 (down 0.5 cent)

Barrel cheese $1.475 (down 0.5 cent)

Butter:  $1.415 (unchanged)  

Grade A NFDM: $1.2925 (unchanged)

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