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

Class III finished Tuesday mixed with the front months gaining against losses in the second half of 2012. Volume clocked in at a moderate 1,092 contacts trading hands with the lion’s share in the March to June time period. Those months that pushed higher did so after the spot block market finished up .50, but technical weakness — a free-fall for the past several sessions really — continued to plague the months of July to December.

Retail sales numbers for January disappointed yesterday, showing an improvement of 0.4 percent vs. the trade guess of 0.9 percent. While demand prospects remain quiet on dairy and fresh cheese still appears plentiful, do not underestimate the value of psychology on any market, including cheese. Should we see further gains on spot market pricing, we’d expect that to draw in additional buyers. The market is not tight, but a perceived tightness is all it will take to boost spot cheese prices for a few weeks. Underlying fundamentals do not appear strong enough for much more than that at this time. Nevertheless, strength in the nearby months ought to lift sell pressure out back, as well.

The grain markets are continuing to chop sideways as Euro-zone leaders continue to throw lifelines to the Greek government. Are we prolonging the inevitable? The trade for corn and soybeans wants to be bullish given the time of year and uncertainty that lay ahead, but a Greek default will take center-stage — especially since such a scenario is not priced into markets yet.  Normally, markets anticipate the news and price it in well before you read it in the news. In the case of a Greek default, however, we expect that markets would trade violently off of that news, having not dialed the possibility into prices much at all. This morning, rumors are floating about that Ukraine will limit exports on corn and barley, but in order to avoid political fallout it will be done via private agreements between exporters and the government.

We look for corn to open 1 to 3 cents higher and beans to open 6 to 9 higher.

Daily CME spot market prices:

Block cheese: $1.48 (up 0.5 cent)

Barrel cheese $1.475 (unchanged)

Butter: $1.40 (up 0.75 cent)

Grade A NFDM: $1.335 (unchanged)

These data and comments are provided for information purposes only and are not intended to be used for specific trading strategies. Commodity trading is risky and FCStone Group, Inc., International Assets Holding Corporation, and their affiliates assume no liability for the use of any information contained herein. Although all information is believed to be reliable, we cannot guarantee its accuracy and completeness. Past financial results are not necessarily indicative of future performance. Any examples given are strictly hypothetical and no representation is being made that any person will or is likely to achieve profits or losses similar to those examples. References to and discussions of exchange traded products are made solely on behalf of FCStone, LLC. References to and discussions of OTC products are made solely on behalf of INTL Hanley, LLC, and OTC products are only available to eligible counterparties.