Spot cheese closes higher on CME

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

Class III futures seemed to want to trade softer after two consecutive sessions with sizeable gains, but the spot market prices advancing by 2.25 cents on the block to $1.6625 and 4.00 cents on the barrel to $1.6500 seemed to stem any downside potential on Tuesday.

Prices traded softer early in the morning and looked to find some support when butter and NFDM prices turned higher following the GDT release. When the spot session saw heavy activity, futures didn’t seem to know which direction to head and prices traded very near 20 cents lower before holding those levels and recovering to a mixed close. July finished the day 8 cents lower; Aug through Dec were steady to 4 higher, while 2014 contracts were under some pressure 2 to 5 lower from Jan through April.

While the technical picture has improved, the only big physical change we can point to is the heat in California and perhaps a slight amount of support in the form of increased exports as CWT announced they’ve accepted requests for 2.361 million pounds of cheese export sales and 665,796 pounds of butter to be shipped from July through December 2013. That leaves heavy inventory levels and strong Midwest milk production to weigh upon prices, and we could see a more mixed choppy trade today and during Friday’s session, particularly with so many market participants out for a long 4th of July holiday.

Spot session results:

Block cheese: $1.6625 (up 2.25 cent)

Barrel cheese: $1.65 (up 4 cents)

Grade A NFDM:  $1.74 (up 1 cent)

Butter: $1.50 (up 2.25 cents)

Grain futures closed Tuesday’s session mixed with corn and wheat slightly higher, while soybeans finished the day down moderately. The July corn contract continues to see sharp volatility as it closed up 17.25 cents yesterday to $6.7275. The December corn contract, meanwhile, traded to a slightly higher close after failing to hold below the $5.00 mark. December corn now looks poised to close the gap at $5.10, potentially rallying back to a 50 percent retracement of the full downside move from Friday through yesterday near $5.20. Today’s session will close early at noon Chicago time, so perhaps that rally can play today into Friday and then allow for new lows to be set coming back from the holiday early next week. We continue to look for upside price protection in the form of call options for end-users, so please call to discuss your specific situation.

This morning, we look for corn to open 3 to 6 cents higher and soybeans 10 to 20 higher.

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