Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
The Class III markets continued their move down from Friday’s session yesterday, pulling 4th quarter and first half 2014 contracts lower on another light volume session.
Technically, the market has been overbought for a while and the pull-back has been long overdue.
The December 2013 contract was the downside leader yesterday, settling down -.17 cents to $17.55 on an estimated 688 trades. The second half 2014 contracts generally traded higher with the Oct. 14 contract settling up .05 cents at $17.10 on the session. We will be watching to see if this is the start of a longer-term trend, but at this point it seems as though it is more of a technical move to get the complex off of the overbought condition we have been in since late September.
Class III milk and cheese are continually reported as plentiful, all through a large technical rally. Powder is the support, but all bulls need a breather and this pullback is just that as people take in new/old data and probably realize Class III simply ran ahead of itself in at least the short term.
Spot session results:
Block cheese: $1.8575 (unchanged)
Barrel cheese: $1.76 (down 0.25 cent)
Grade A NFDM: $1.86 (unchanged)
Butter: $1.465 (down 1.75 cent)
In the corn market yesterday, weekly export inspections came in at 32.2 million ― well above last year, but with rain and snow in the forecast for the Midwest this week we may see harvest delays as producers are working hard to get that crop in before the hard frost. Dec. 13 Corn settled at $4.4400, up 2 ½ cents on the session. Soybean export inspections came in at 59.3 million vs. 65.5 million last year and trade was looking for confirmation on Chinese buying interest for beans. The market closed up 12 cents to $13.0325, which is above short-term resistance at $13.0125, and we will watch to see if we get more of a continuation rally out of the contract in the short term.
The trading of derivatives such as futures, options, and swaps may not be suitable for all investors. Derivatives trading involves substantial risk of loss, and you should fully understand those risks prior to trading. Any reference to past performance is not indicative of future results. All references to futures/options trading are made solely on behalf of FCStone, LLC. All references to swap execution and bi-lateral swaps are made solely on behalf of INTL Hanley, LLC. FCStone, LLC will clear swaps when applicable. Swaps are only available to eligible counterparties. All observations of economic, political and/or market conditions are not intended to refer to any particular trading strategy, promotional element or quality of service provided by INTL FCStone Inc. and its subsidiaries and should be construed as market commentary. All recommendations to buy or sell a specific derivative or forecasting statements regarding market activity and the pricing thereof should be construed as a solicitation in any jurisdiction in where such an offer or solicitation would be legal. Proper context and guidance including but not limited to the particular trading objectives, financial situations and the needs of the intended audience were taken into consideration when this recommendation was prepared. Contact your account representative for specific advice to meet your specific trading preferences or goals. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by INTL FCStone Inc. and its subsidiaries. Sources of information believed to reliable were used in preparing such observations, and no guarantee or representation regarding the accuracy of those sources has been made. INTL FCStone Inc. and its subsidiaries are not responsible for any redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material.