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

The Class III market jumped back to life yesterday, as traders rattled off 1,340 trades in a mostly negative session ― along with the now long-standing trend of higher volume yielding lower prices. 

Prices started the morning quietly to the down side before nose-diving into the afternoon. Near-dated contracts took the brunt of the selloff, as the May to July contracts fell between 24 and 48 cents. All was not lost for the bulls, though, as prices bounced back after the pit session ended ― courtesy of revisions and stronger prices in the mid-week Dairy Product Sales Report, removing big chunks of their earlier losses and closing out the trading day in a more supportive fashion. 

The spot session was of little help to those trying to decipher market sentiment, as no activity of any sort was seen. The cold storage report presented the market with a 0.7 percent draw-down in stocks from last week, which was seen as slightly bullish. 

So it was the Dairy Product Sales Report that caught the trade off guard after prices had settled lower yesterday. Several key revisions to last week’s prices sponsored a late-day, electronic market rally for Dry Whey and Class III. The AMS revised last week’s dry whey price up 4 cents! Meanwhile, they revised last week’s NFDM price up over 2 cents on an additional million pounds of volume. Blocks rose by.4 cents to $1.54, but the barrels fell 4.8 cents to $1.54.  So it was Dry Whey and NFDM reported prices that really caught the trade’s attention.  According to a discussion I had with the AMS yesterday, they collect data differently than did NASS (.i.e. total price versus backing into total price from a price per pound figure, etc.) and so the discrepancy is the result of the shift in data collection, which they expect to now be corrected.  Even without these massive revisions, prices were by and large stronger than expected. 

A choppy day in the grain complex, as the session started with pushes lower in the beans, corn, and wheat. The grains, however, battled back from their intraday lows as traders book profits gleaned from the negative sentiment brought about by the recent USDA reports. May corn settled 1 ¼ cents higher at $6.36, while the wheat closed 2 ¼ cents higher at $6.28. The soybeans were the losers on the day, closing out down 4 cents at $14.22. 

More volatility is in store, as the historic pace of the early plantings should continue to weigh on the grain complex. At this point, only an unexpected weather event or major spikes in demand seem likely events capable of reversing the short-term negative bias of the markets. 

We look for corn to open 1 to 3 cents higher and for beans to open 4 to 7 higher.

Daily CME spot market prices:

Block cheese: $1.4875 (unchanged)

Barrel cheese $1.46 (unchanged)

Butter: $1.425 (unchanged)  

Grade A NFDM: $1.2675 (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.