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

The job of a futures market is to provide some level of transparency to the collective expectations of future prices based on today’s information. In reality, however, we see that a futures market will also toggle between two extremes: the level at which buyers do not want to buy and the level at which sellers do not want to sell. 

We reached a point Thursday where the sellers recoiled a bit even though the news of the day is of sluggish cheese sales ― particularly the barrel variety. Even in the face of recurring spot market declines, speculative and producer selling was light yesterday. Nearby Class III futures regained a small slice of lost ground as the June to September contracts bounced 4 to 13 cents on what otherwise was a quiet day of moderate volume.

Block cheese is tighter than barrel cheese right now, but we expect there to be additional pressure on the block price since we’re still in the mid-$1.80s. The international prices have stabilized and even cooled over the past few weeks and so U.S. buyers are saying $1.85-$1.90 is too high ― as of today ― to build inventory or run promotions.

Spot session results:

Block cheese: $1.8575 (down 0.75 cent)

Barrel cheese $1.7225 (down 1.25 cent)

Grade A NFDM: $1.70 (unchanged)

Butter: $1.6175 (down 1.25 cent)

The grain complex got a pre-USDA report rally Thursday as farmer’s shut the bin doors and shorts covered positions. July corn rallied 15 cents by the end of the day, while December new crop tacked on 8 cents. This has been an extremely choppy market to trade with heavy technical resistance just above and major long-term support just below. The snow and rain in the western Corn Belt last week eases moisture concerns after a drought, but… it also delays plantings.  

Traders are jostling in a cornucopia of unknowns. Weather, planting progress, crop development, tight old crop supplies, USDA surprises are all tugging back and forth at grain prices. We’ve got late-spring snows; 48.1 percent of the United States in some level of drought, and today’s USDA monthly crop and supply demand estimates are expected to include a corn ending stocks number approaching 2.0 billion bushels for next year. 

Please keep your hands inside the ride at all times. 

If you’re an end user of corn, however, you don’t need to be at the whim of the trade de jour.  You can do something to lock in a price or a worst-case scenario price on a portion of your feed needs. Call to discuss. 

This morning, we look for grains to open mixed ahead of the midday report.

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