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

Class III futures opened the week with stronger prices early in the morning prior to the spot session with July and August trading to 20+ cent gains and July was up 29 cents at one point. However, the spot session saw a sharp decline in the blocks as the spread began to close with the blocks falling, as the futures market seemed to predict over the past three sessions.

Despite the blocks falling so sharply, however, futures market declines were a bit subdued in comparison. After trading 29 higher, July traded down to a loss of 39 cents before recovering into the close and finishing the day down 22 cents. Interestingly, June lost 23 as the market has little faith that physical cheese prices will reach the levels seen last week now on the NDPSR.

Despite the very wide range of trading, volume failed to reach 1,000 contracts, ending the day at 920 total trades. June actually led the declines, closing down 23 cents, while other months through November were 5 to 22 lower. December through February 2013 did, in fact, close a bit higher on the day gaining 2 to 7 cents. In the short run, there seems to be little for the bulls to hold onto. If buyers do step into the spot session today, we would look for a recovery on futures.

Grains rebounded from Friday’s late day selloff as a hot dry forecast is in the works through the remainder of the work week. Corn closed up 16.5 cents in July at 568 on strong basis and up 13.75 cents in December at 523.75; soybeans closed mixed with July down 4.25 cents on soft domestic basis, while November beans were up 10.25 cents to 1268.25. 

Following the close of trading, corn condition was reported unchanged at 72 percent, despite expectations for a slight decline while soybeans were rated at 65 percent in their initial report ― well below expectations for ratings to be higher than last year, which was 67 percent. Weather will continue to be the market’s first concern, while keeping an eye on the outside markets and currency movement. We are now just over a week away from the June USDA report, which will begin to come into focus as the week draws to a close. We look for a sideways market with an upside bias over the coming sessions unless the weather reports return to a wetter pattern. 

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

Daily CME spot market prices:

Block cheese: $1.5925 (down 5.75 cents)

Barrel cheese $1.5325 (unchanged)

Butter: $1.40 (unchanged)  

Grade A NFDM: $1.185 (unchanged)

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