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

Class III prices traded moderate volume yesterday, as prices were mostly higher led by nearby months. November closed surprisingly lower with the continued gains in the spot market, as blocks were up 2.25 cents on three trades while barrels were quiet. Little seems to be changing, with cheese prices continuing to inch their way higher and Class III futures not showing much, if any, confidence in the sustainability of the market to continue to move higher.

The most-lively discussion at the CME Annual Dairy Meeting revolved around the CME spot markets and moving them to an electronic platform, though it’s not necessarily a new topic. The issue is anonymity and liquidity in the dairy spot markets. Will electronic cash markets really achieve the sought-after goal of improving trading volumes? Or, will it be the beginning of their decline?  Many respected thoughts came to the forefront, but no resolution. The take-away: If you have an opinion on that matter, we encourage you to let your thoughts be known to the CME and/or to us.

Other discussion revolved around position limits for spot month futures and potentially having those limits moved higher and the types of OTC trades that are taking place as well as block trading. Dodd-Frank remains a major concern and has really put the brakes on many potential market and contract changes, though certainly the CME is making all effort to get needed changes done.

Cash cheese volume picked up yesterday with a mixed but mostly higher trade. A total of 60 contracts were seen with prices ranging from -0.002 to +0.010. Class IV futures were very quiet yesterday with just 4 total trades all coming in June 2012 though price was unchanged there. January was the only month with a price change up 2 cents.

The U.S. dollar is sharply higher this morning.

Grain prices saw a solid recovery yesterday as wheat price gains led the market higher. The recovery in the corn market meant Tuesday’s closing price was the highest close since Sept. 21. This telling us that the market still fears a reduction in the final corn yield number for today’s report.  

Daily CME spot market prices:

Block cheese $1.90 (up 2.25 cents)

Barrel cheese $1.93 (unchanged)

Butter:  $1.8075 (down 0.75 cents)  

Grade A NFDM: $1.430 (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.