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

Blocks and barrels extended their recent rally yesterday with blocks settling up 1 ½ cents and barrels up 2 ¼. Since Nov. 21, blocks have posted modest gains, settling up 4 ½ cents. However, barrels have struggled to gain 1 cent week over week. Overall, domestic cheese production seems to be running along seasonal lines. The recent firm tone, on the heels of good export numbers and a slightly bullish Cold Storage Report, have pushed January Class III to levels not seen since mid-to-late June. Although there seems to be a bullish tone as of late, the market at these levels look a bit overbought. Class III ended the day firm with most months higher, settling anywhere from + 17 to -4. However, some cracks could be seen in the 2nd half of 2014 with both June and Aug turning lower after nearly a week of solid gains.

Spot session results:

Block cheese: $1.865 (up 1.5 cent)

Barrel cheese: $1.77 (up 2.25 cents)

Grade A NFDM:  $2.00 (up 1.5 cent)

Butter: $1.665 (down 1.5 cent)

In the grain complex, Dec corn settled down 6 ¼ cents under pressure from ethanol values and in reaction to Chinese comments. China announced that it intended to let market prices decide grain. Monday night data showed 95 percent of the U.S. crop harvested. Producers continue to hold large inventories facing dismal price prospects into spring.

Jan Soybeans settled unchanged on the day as the USDA announced 360,000 of U.S. soybeans sold to an unknown buyer; however, at the same time the USDA announced 300,000 tons of cancellations with China. The Chinese trade seems to be front and center, moving this market as U.S. values now sit at nearly a $1.00 premium to South American new crop values. South American weather remains favorable with over 80 percent of the Brazil crop planted and nearly 40 percent planted in Argentina.

This morning, we look for grains to all open with a firm bias.

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