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

Even as blocks and barrels held steady yesterday, the downward momentum continued. Class III settled anywhere from +6 to -34, with January bearing the brunt of this move, down 38 cents at one point. That being said, although Q1 has borne the brunt of recent moves (down 81 cents in the last month), the 2013 pack is nearing its 30-day low of 18.38, currently trading at 18.42.

From a fundamental perspective, the “post-holiday hangover” is still in effect. Although sales are relatively good (ramped back up), wholesalers are most likely burning through excess inventory and reluctant to procure new product. However, this does not mean potential buyers have disappeared. Although activity in the spot market has slowed, last-minute buying for the upcoming holidays is definitely a possibility. While this slide is expected to continue, cheese buyers may be holding out as long as possible to procure product for to fill last-minute orders, taking advantage of current price erosion. In other words, the slide, while still under way, might be nearing an end. 

The grain markets were mixed yesterday with March Corn settling down 2 ¾ cents and March Beans up 2 cents with the focus turning to South America. Informa is estimating Brazilian corn production at 66.2mmt vs. USDA’s 70mmt, Argentina at 27 vs. USDA 28 mmt. Rain continues to hamper planting in Argentina. Although South American estimates and weather are on the minds of traders, so is the impending fiscal cliff.  With the fiscal cliff now less than 30 days away, traders may be taking a more cautious approach. We expect this choppiness to continue in the short term.

We look for the grain complex to open slightly higher.

Block cheese: $1.76 (unchanged)

Barrel cheese $1.7025 (unchanged)

Grade A NFDM: $1.5575 (unchanged)

Butter: $1.58 (down 1 cent)

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