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

Class III futures regained some of Wednesday’s losses on lighter volume, as just 630 contracts traded hands between 11 higher and 4 lower yesterday. We’d chalk up the paltry rise in Class III futures to a resurgence of firming price action for dry whey futures, not the stable $1.90 spot market. Spot cheese went quiet with a lone bid for barrel cheese at $1.93, accompanied by a lone offer at $1.95. It’s hard to read too much into that activity, though anecdotal discussions yesterday point to some available fresh barrels freeing up.

Futures are trading largely sideways this week, with little impetus for either side of the market to take a hard-line stance. From commercial buyer perspective, prices into 2012 are attractive. Due to expectations of weaker post-holiday demand, however, there is little worry about getting their price from that camp today. Meanwhile, producers remain reluctant as they grapple with evasive profit margins.

CWT announced it assisted in the sale of 2.1 million pounds of cheese to Asia and the Middle East yesterday.

Cheese futures also went quiet Thursday as only 7 contracts traded between unchanged and 0.017 lower (April). We expect that as spot market activity increases, we’ll see another substantial rise in volumes for cheese futures.

Corn, beans and wheat all finished lower Thursday as concerns over outside markets continue to be a wet blanket on commodity prices. Additionally, MF Global problems continue to keep some of the world’s biggest traders on the sidelines. Still all the bullish production and yield figures are crowded out by a real uncertain demand picture going forward. The future price of U.S. grain looks somewhat threatened as we wade through the murky waters of global competition for a buyer.

The technical picture is not much better. Perhaps today was a head fake lower for corn and wheat, but the recent trendline support is in jeopardy. Pete Ullrich of Ullrich Analytics remarked, “the bullish sideways correction under medium-term resistance continues, but now there is a new, actual sell signal [for corn].” 

Chinese customs data showed corn exports rose to 41,000 tons in October, up from 10,000 tons in September. Cumulative Jan-Oct corn exports stand at 132,000 tons, up 18% from last year.  The data showed October soybean imports at 3.81 million tons, down 8% from September’s 4.13 million ton total.  Jan-Oct imports of 41.5 million tons are down 5.4% from last year. Weekly export sales this morning were mostly disappointing and very low for both corn and wheat but solid for soybeans despite today’s large decline.

The overnight markets were recovering some of the day session losses as corn and wheat were each up 3 to 4 cents and soybeans were up 9 to 11 cents. By this morning, prices have more of a mixed tone with beans higher while corn and wheat are slightly softer.

We look for corn to open mixed and beans to open 3 to 5 cents higher.

Daily CME spot market prices:

Block cheese $1.8975 (unchanged)

Barrel cheese $1.93 (unchanged)

Butter:  $1.77 (down 2 cents)  

Grade A NFDM: $1.435 (up 0.25 cent)

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