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

Class III started on a firm note yesterday. With the exception of February, which posted a record high of $22.98/cwt. on Tuesday, nearby Class III futures are acquiescing to spot price support; retesting contract-highs, not establishing new ones. Demand for fresh cheese still appears to underpin, but there is a reluctance to get out too far ahead of the spot market. Talk of a ~4.0% increase in California milk supply may provide a bit of a headwind.

A late-morning uptick in activity brought Class IV gains of 2¢ to 22¢ across the entire complex for 2014. Once spot came around we saw a push of futures buying, with July leading the way, posting a gain of 33¢ to settle at $20.83/cwt. Butter churners have been replenishing stocks as fast as they can to meet orders, despite fear that these price levels may have incurred a certain amount of demand destruction. 

According to the NDPSR, sales were strong last week with increasing prices.
Yesterday’s CWAP NFDM price announcement of $2.0085/lb. was largely as expected.  NFDM futures, however, caught another round of buy-side interest, posting gains of 0.5¢ to 2.25¢ throughout 2014.

Jan. 29 spot session results:
Block cheese: $2.34 (up 2.0¢)
Barrel cheese: $2.30 (up 2.0¢)
Grade A NFDM:  $2.0525 (down 2.25¢)
Butter: $1.8950 (down 0.5¢)
Today's expectations:
• Class III, Cheese and Dry Whey futures to open mixed
• Class IV, Butter and NFDM to open mixed

Grain futures
The entire grain complex posted significant losses. Beans took the most heat, down 16¢ for March, due to reports of higher yield expectations coming out of Brazil, a record export number and continued cooperative weather for the Southern Hemisphere. Corn posted a loss of 4¢, mostly dragged down by soybeans and wheat.

Today’s expectation:
Grains look to open slightly lower 

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