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

The Class III futures ended the week with mixed prices at settlement, with the Nov12 through May13 contracts settling between 5 and 39 cents lower while the May13 through Dec13 contracts closed between unchanged and 12 higher. The first quarter of 2013 futures pack fell 17 cents on the day to close out at $19.18, with a weekly loss that totaled 33 cents. The Class III futures sold off in response to the weakness in the spot cheese session, while receiving outside negative pressure resulting from an overall bearish view on commodities since the presidential election. 

Conditions are improving in the Northeast after the battering of two major weather events, though the power outages in that region have some concerned over the condition of dairy products in storage in warehouses in the area. Weather conditions across much of the nation are becoming more beneficial to milk production as output levels are increasing in the Southeast, Southwest and Pacific Northwest.

The grain complex closed out the week with lower prices across the board after the release of the USDA’s November crop report. The report pegged U.S. corn production at 10.725 billion bushels, higher than trade expectations and 19 million bushels higher than the USDA’s October estimate. Corn yield was estimated at 122.3 bushels per acre, 0.2 bushels ahead of trade estimates and 0.3 bushels higher than the October report. The soybean production estimate increased by 111 million bushels from the USDA’s October report to 2.971 billion bushels, slightly higher than trade expectations. The soybean yield was estimated at 39.3 bushels per acre, 1.5 bushels higher than the October report and 1.1 higher than trade expectations. 

The Dec12 corn contract fell by 2 ½ cents to $7.38 ¾ to end the day, after a day spent mostly in positive territory. The corn contract posted a loss of just ¾ of a penny for the entire week.  The Jan13 soybean contract fell hard, losing 44 ½ cents on the day, and 75 ½ cents for the week, to settle at $14.51 ½. The Dec12 wheat contract slipped back below the $9.00 mark to $8.86 ½ after losing 16 cents on the day and a total of 22 for the week. The week should see the grain markets seeking support levels on the downside as market participants weigh the supply data against demand concerns in the coming weeks.

We look for corn to open 2 to 4 cents higher and beans to open 18 to 22 lower.

Block cheese: $1.92 (down 7 cents)

Barrel cheese $1.835 (down 7.5 cents)

Butter: $1.89 (unchanged) 

Grade A NFDM: $1.575 (unchanged)

These data and comments are provided for information purposes only and are not intended to be used for specific trading strategies. Commodity trading is risky and FCStone Group, Inc., INTL FCStone Inc., and their affiliates assume no liability for the use of any information contained herein. Although all information is believed to be reliable, we cannot guarantee its accuracy and completeness. Past financial results are not necessarily indicative of future performance. Any examples given are strictly hypothetical and no representation is being made that any person will or is likely to achieve profits or losses similar to those examples. References to and discussions of exchange traded products are made solely on behalf of FCStone, LLC. References to and discussions of OTC products are made solely on behalf of INTL Hanley, LLC, and OTC products are only available to eligible counterparties.