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

It was a mostly higher open to the week, but that’s not how the session ended yesterday. Oct to Dec 2013 Class III contracts finished down 13 to 39 cents on the day as the spot market dipped with blocks down 2 cents to $1.82 and barrels down 2.25 cents to $1.79.

With nearby futures already trading at a discount to the spot market, it was a bit surprising to see such sizeable movement to the downside. But it appears the spot selling only served to make trade more comfortable with the discount as it actually increased on the day. Volume was very strong with over 1,100 trades taking place and over 500 coming in October alone. 2014 futures were very lightly traded as only one contract traded in the 2nd half of the year, but prices there were resilient to the spot market decline as they finished steady to 7 higher. Spot will be closely watched in the coming sessions, but we think the market is likely to continue to be range-bound with likely limited downside potential, expecting to see good support as we near the $1.75 mark.

Spot session results:

Block cheese: $1.82 (down 2 cents)

Barrel cheese: $1.79 (down 2.25 cents)

Grade A NFDM:  $1.83 (unchanged)

Butter: $1.52 (down 1 cent)

Weekend rains had a bearish impact on the soybean market to open the week with November closing down 31.50 cents to $13.4825. The strong sell-off on soybeans, however, didn’t really pull corn lower as the Dec corn contract finished down 2.5 cents at $4.5650. There was a lot of talk of unwinding of bean vs. corn spreads keeping the corn market from falling off.

Taking a look at the charts, it could be an interesting session for soybeans as there is potential to test support in the $13.40 range. With yields reportedly strong for corn, the on-going harvest leading to basis levels softening, as well as the potential for some more rain this week to continue to stabilize the soybean crop, we may have some additional downside potential in the coming sessions.

This morning, grains should open slightly firm across the board.

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