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

The Class III market broke from its recent bearish trend in an explosion of buying after just a 0.25-cent increase spot barrel market. The March 2013 contract leapt as much as 73 cents higher mid-day amid a buying flurry, before retreating later in the day, while most of the other nearby contracts followed suit, caught in the updraft. By the time the dust settled, the futures contracts settled between unchanged in the tail-end months and 27 higher, with the first-half contracts all posting double-digit gains as nearly 2,000 contracts traded. The cheese futures tracked with the Class III, with the near-dated contracts reaching as much as 3 cents higher intraday, settling between unchanged in the later-dated months and 1.5 cents higher with over 100 total trades.    

Spot session results:

Block cheese: $1.645 (unchanged)

Barrel cheese $1.5325 (up 0.25 cent)

Grade A NFDM: $1.52 (down 1 cent)

Butter: $1.555 (unchanged)

In the grain complex, the March corn contract settled for the day just 0.25-cent higher to $7.40 ½, while both the soybeans and wheat closed in negative territory. The March soybean contract fell 10 ¼ cents to $14.68 ½. 

The weakness in the grain complex was attributed to a number of factors. Both the corn and wheat posted uninspiring weekly export sales numbers. Cumulative sales for the corn sit now 51 percent lower year over year with loadings down 53 percent. The USDA is now forecasting annual export sales to be down 38 percent from last year’s tally. Export sales for the wheat are running 4 percent lower than last year with loadings down 11 percent, while the USDA is predicting total annual sales to be unchanged.  Soybean export sales continue at a rampant pace, with continued calls for U.S. stocks to dwindle to exceptionally tight levels in the coming months. 

Weather remains a main driving force for the grain markets, as rains falling in Argentina alleviated some concern as to crop conditions there, albeit only momentarily. Overall, dry weather patterns are expected for Argentina for the near term, with calls for some scattered showers possible this weekend.  In Northern Brazil, too much rainfall has slowed the harvest, though the rains are considered beneficially to late-planted crops. In the U.S., dry weather continues to be a concern in HRW growing areas, while drought conditions continue to expand in the West.  

We look for corn to open up 2 to 4 cents and beans 8 to 11 higher. 

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