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

You have to feed the bull to keep its rally alive — and yesterday the bull missed a meal. The spike upward in price, volume and open interest over the last few weeks meant that more likely than not speculators had gotten aggressively long. Those same specs are increasingly likely to get spooked out of their positions at the first sign of trouble.  When the spot market got quiet and saw the first barrel price decline since Oct. 31, selling, particularly nearby, was fast and furious.

The price decline in December, which traded limit down at one point yesterday, did so on a slight increase in Open Interest. We look for buyers to get back in there today which could mean a bounce early.  Even if that occurs with Thanksgiving a week away, and other holiday orders well booked, we have continue to have reasonably low expectations that cheese will sustain itself for long above or near two dollars a pound.  

U.S. retail sales rose 0.5 percent in October according to the Commerce Department report earlier this week. This was the 5th consecutive month of retail sales gains. The retail sales report is the government’s first look each month at consumer spending, which accounts for 70 percent of economic activity in the United States.

Corn futures came off a bit, but as markets can do only three things in general — higher, lower or sideway — corn has chosen sideways for weeks now.  The charts look soft and the fundamentals counter that with some expectations of carryout tightness and certainly the overall firm energy markets support ethanol consumption at least in the short term. But outside market influences have seen strength in the U.S. dollar recently and choppiness/weakness in the global equities markets. Combine this all and short-term corn is simply trying to make its mind up.

This morning, we look for corn to open 4 to 6 cents lower and beans to open 2 to 4 lower.  

Daily CME spot market prices:

Block cheese $2 (unchanged)

Barrel cheese: $2.0475 (down 0.25 cents)

Butter:  $1.71 (down 3 cents)  

Grade A NFDM: $1.44 (unchanged)

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