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

Class III was weaker yesterday, settling anywhere from unchanged to 22 lower with the market giving back most of the gains made in the previous session and the evening session followed along lower, as well, There is no more $19 milk. 

This move on strong volume and a large OI increase once again highlights the volatility we have been discussing over the last few weeks and the recent softness in price. Both corn and Class III have been trading directionally near identical ― percentages have varied, but directions have matched.  With weather still the predominant concern and motivating factor influencing crop conditions and milk production, we expect these will continue to move in tandem for the most part. Bear spreading, selling nearby contracts and buying deferred contracts has proven profitable and looks to continue in that pattern for the time being.

In the grain complex, there was a pullback in the corn and bean markets yesterday with profit-taking, outside market concerns with crude down over two bucks yesterday, and talk of some increased rain chances in the afternoon weather reports. Early last night, the grain market had recouped all of the day’s losses, but the overnight session gains have eroded and prices have turned negative, led by wheat.

Watch the $8.00 mark in Sep12 and Dec12 corn; we just now broke through it and violently. Sep traded 791 for an instant on a large sell order that came in and immediately snapped back up to 7.98. It looks like today might be the violent fight over the $8.00 line.

December corn settled down 8 ¾ to $8.05 ¼, but still over the critical $8.00 mark. Currently, corn has recouped those gains early in the overnight session. November beans followed the same story line, a slight pullback and are currently trading up 17 in the overnight session. November soybeans settled down 2 ½ to $16.41.

We look for corn to open 5 to 8 cents lower and beans to open soft.  

Daily CME spot market prices:

Block cheese: $1.705 (unchanged)

Barrel cheese $1.6825 (down 0.25 cent)

Butter: $1.645 (down 0.25 cent)  

Grade A NFDM: $1.375 (unchanged)

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