Editor’s note: This market commentary is provided by the Dairy Division at FCStone/Downes-O’Neill in Chicago, Ill.
Class III trading volume spiked Thursday as more than 1,400 contracts exchanged hands in what was a dramatic sell-off for nearby futures. The block market finally came alive for the first time since Nov. 30 ― nine trading days ago ― closing down 3.5 cents to $1.7250. Nearby Class III futures crumbled under the fresh spot cheese sell pressure and technical deterioration created by taking out key technical support levels and establishing a six-month low on the lead January contract. January also garnered more than one-third of all trading volume.
We’d like to say there was some closure to block/barrel spread, but barrels also declined Thursday, finishing 2.5 cents lower at $1.6250. Overall sentiment is weak. It’s quiet. But thoughts are not dismal. Buyers continue to hit the pause button, not walking away entirely. In the interim, our phones rang with questions about $1.50 cheese yesterday. We do not see that as a likely scenario anytime soon.
The grain complex was largely mixed Thursday as corn prices flirted with support levels, closing just slightly lower on the day. Support may have also come from stronger-than-expected soybean export sales. The grain markets seem like they want to go lower, but South American estimates are open for debate as crops are still being planted there, a weaker U.S. dollar and still mostly dry conditions in the western Corn Belt, the path of least resistance could easily be to the upside in the short term.
We look for corn to open 1 to 4 cents lower and soybeans from 8 to 12 higher.
Block cheese: $1.725 (down 3.5 cents)
Barrel cheese $1.625 (down 2.5 cents)
Grade A NFDM: $1.5575 (unchanged)
Butter: $1.595 (unchanged)
These data and comments are provided for information purposes only and are not intended to be used for specific trading strategies. Commodity trading is risky and FCStone Group, Inc., INTL FCStone Inc., and their affiliates assume no liability for the use of any information contained herein. Although all information is believed to be reliable, we cannot guarantee its accuracy and completeness. Past financial results are not necessarily indicative of future performance. Any examples given are strictly hypothetical and no representation is being made that any person will or is likely to achieve profits or losses similar to those examples. References to and discussions of exchange traded products are made solely on behalf of FCStone, LLC. References to and discussions of OTC products are made solely on behalf of INTL Hanley, LLC, and OTC products are only available to eligible counterparties.