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

In a volatile week, the December 12 Class III contract lost 20 cents, closing at $20.49/cwt. It has been a long protracted bull run which has turned from upward movement to choppy sideways action.

Despite the high prices for milk/cheese, all we hear indicates that demand is surprisingly good at the “moment” ― not a lot of forward buying and export concerns linger, but demand is present for the time being. This is interesting because many commodities that have rallied are seeing pullbacks in price: crude oil, corn, beans, gold and more. There is a thought we could see a pullback in both demand and price in the near future, but it is yet to occur. As a result, while short-term demand is good, there is a clear reduction of forward buying.

While the East Coast prepares for massive Hurricane Sandy, we must analyze the implications. Floor trading on the N.Y. exchanges will be halted, but this is likely to have minimal, if any, impact on out dairy markets. However, potential ― perhaps likely ― disruption of milk pickups could cause some milk to go to waste and might have some small short-term bullish implications. We’ll keep an eye on it. In the meantime, our thoughts and prayers for safe-keeping go out to all those in the region.

In the grain complex, looking at the weekly Dec12 corn chart, it is starting to get bearish. We have broken below the 20-week moving average and are about to test the first Fibonacci level of support. If it doesn’t hold, then we are likely to test seven and perhaps even near the 6.50 level before the year is out.

We look for corn to open 2 to 4 cents higher and for beans to open 14 to 16 lower.

Block cheese: $2.12 (up 3 cents)

Barrel cheese $2.08 (up 2 cents)

Butter: $1.89 (unchanged) 

Grade A NFDM: $1.56 (unchanged)

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