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

Class III futures saw a significant drop on Monday. The March contract hit limit-down on a couple occasions during the session, ultimately settling down 65¢. April wasn’t far behind, settling down 57¢, while other months were 4¢ to 32¢ lower through the balance of 2014. This seemingly is in the face of bullish consensus coming out of IDFA’s Dairy Forum last week, so perhaps yesterday was just a market correction triggered by fear ahead of the GDT auction this morning.

Cheese futures moved in line with the Class III market. March settled at $2.036/lb., a massive discount from current spot levels. Whey prices were also mostly lower.

Class IV futures opened the week lower, 9¢ to 44¢ lower on the day, with April leading the declines. Powder seemed to be the biggest culprit for the selloff. 

Spot butter seems to be in the sweet spot from an international standpoint,; futures seemed to see spillover weakness from NFDM and Class III trading. 

Feb. 3 spot session results:

Block cheese: $2.36 (unchanged)

Barrel cheese: $2.32 (unchanged)

Grade A NFDM:  $2.04 (unchanged)

Butter: $1.89 (up 1.0¢)


Today's expectations:

• Class III to open lower as the overnight session opened to double-digit losses, but look to GDT and spot to determine the direction for the day

• Class IV, Butter and NFDM to open lower


Grain futures

Grain markets continued their recent rally, led by soybeans and export news. March beans closed up 10¢ at $12.9275 bushel; corn was up 1.75¢ to $4.3575/bushel. We see prices as now having limited downside into the spring months – for corn in particular.

Today’s expectation:

Grains look to open higher, with soybeans and meal leading the way  

The trading of derivatives such as futures, options, and swaps may not be suitable for all investors. Derivatives trading involves substantial risk of loss, and you should fully understand those risks prior to trading. Any reference to past performance is not indicative of future results. All references to futures/options trading are made solely on behalf of FCStone, LLC. All references to swap execution and bi-lateral swaps are made solely on behalf of INTL Hanley, LLC. FCStone, LLC will clear swaps when applicable. Swaps are only available to eligible counterparties. All observations of economic, political and/or market conditions are not intended to refer to any particular trading strategy, promotional element or quality of service provided by INTL FCStone Inc. and its subsidiaries and should be construed as market commentary. All recommendations to buy or sell a specific derivative or forecasting statements regarding market activity and the pricing thereof should be construed as a solicitation in any jurisdiction in where such an offer or solicitation would be legal. Proper context and guidance including but not limited to the particular trading objectives, financial situations and the needs of the intended audience were taken into consideration when this recommendation was prepared. Contact your account representative for specific advice to meet your specific trading preferences or goals. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by INTL FCStone Inc. and its subsidiaries. Sources of information believed to reliable were used in preparing such observations, and no guarantee or representation regarding the accuracy of those sources has been made. INTL FCStone Inc. and its subsidiaries are not responsible for any redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material.