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

A holiday week begins ― and what a way to start it off with a rally across the dairy complex. Cue the fireworks!

The Class III market started the week off with prices climbing the most in the 3rd quarter than they had since June 5. The 3rd quarter pack average settled out the day +0.50 to $18.15. July and August contracts were the benefactors of not only the most volume on the day, but also the largest price increases with July gaining 49 cents on 506 trades and August gaining 56 cents on 627 trades.

High temps in the western U.S. and already reported losses of production due to the extreme heat in the area were the main catalysts for the move pre spot. We had heard reports of producers out West losing anywhere from 5 to 9 pounds of milk per cow since the heat rolled in, and expect to see more of this as the heat hangs on for the next few days. We are officially into summer, folks, and while this is supposedly a short-term heat wave and temps are to moderate more by the weekend, we are reminded that there is a lot more summer to come and we may see more of these events as time rolls by.

A one-day breakout does not a trend make! It is understood that we were much oversold coming into yesterday’s trade, and we were due for a bounce. Remember that we have already had two bull bounces over the last two months that have led to ultimately lower prices. Let’s see if or how much continuation we get before we get on the bandwagon and start calling for $20 milk. It would be prudent, however, for those that have not locked up anything for the 4th quarter to get some cheap floors in now while you can.

Spot session results:

Block cheese: $1.64 (up 0.25 cent)

Barrel cheese: $1.61 (up 1.25 cent)

Grade A NFDM:  $1.73 (unchanged)

Butter: $1.4775 (up 5 cents)

Grains opened the week with a continuation from Friday’s session with old-crop corn moving higher and new-crop moving lower, but not markedly so. Around 11a.m.Chicago time, we saw a big shift in sentiment as July corn fell off of the highs and moved markedly lower on the day. The July corn contract went from $6.9000 to settle at $6.5550 down – 23.75 cents on the day and July beans went from their high of $16.0425 to $15.7050 to close up 6.00 cents on the day. While export inspections were a bit above estimates, that did very little to move the market. It was reported that numerous interior U.S. corn basis values were falling. We heard reports of 10 to 20 cents lower in the central Midwest, which spurred on a sell-off in old-crop corn pulling other contracts off their highs, as well. Funds continued to liquidate positions today as well in corn and beans. Since Friday, funds have liquidated 39,000 contracts in corn and 12,000 contracts in beans.

This morning, we look for a slightly higher open across the board.

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.