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

Class III trading volume cooled Friday as only 903 contracts traded in a mixed session. The selling pressure continues to remain within the second-half contracts, while a temporary stabilization of near-term contracts created a slight bump in prices.No contract gained or lost more than nine cents on the day, as the heavy selling of late eased into the weekend. The stepping aside of sellers could be no more than a short-lived reprieve. The USDA projects that milk production will continue to grow in 2012 at a rate of 1.3%. The active spot session did little to boost confidence in a Class III recovery. The blocks remained unchanged on three trades at $1.4750, while the barrels posted a gain of 0.75 cents on 11 trades and two bids to close out at $1.4850. The barrels were unable to hold the session high, though, as sellers were more than willing to unload their product. Price erosion should continue to take hold of the Class III market until demand picks up to a level to offset the excess milk on the market.

Corn futures ended lower last week after the neutral USDA report on Thursday that combined with a strong dollar saw corn trade off its highs. The market, which has been trading within the same range, unable to breakout to the upside, is beginning to reel in off the highs. Many farmers noticed that the neutral report could be the top of the range for the near future, thus prompting the desire to sell near the $6.50 mark and prices closed the week back down at $6.31 ¾ for March, down 5 ¼ cents on the day Friday. 

Soybeans continue to struggle with the South American weather conditions and are holding their own, despite the grain declines, as they were up 1.5 cents to 1229 to close the week. Nothing is on the horizon for this week but the 24th is the release date for the Ag Forum 2013 baseline estimates. Look for the grain markets to closely follow the currency and outside market movements.

We look for corn to open 4 to 6 cents higher and for beans to open 10 to 12 higher.  

Daily CME spot market prices:

Block cheese: $1.475 (unchanged)

Barrel cheese $1.485 (up 0.75 cent)

Butter: $1.4325 (unchanged)

Grade A NFDM: $1.335 (unchanged)

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