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

Both blocks (+2 cents) and barrels (+1.25 cents) continued their recent charge yesterday, as the Class III market seems to be reluctantly in tow.

Futures ended the day settling anywhere from -10 to +17, with the gains mostly coming in the Sept-Nov contracts. Regardless of this lackluster response to spot, Q4 futures look to be retesting recent highs, potentially running into resistance? Currently, the 2014 pack in Class III is trading at $16.76, slightly off its recent high of $16.85. Overall, the pendulum continues to swing with seasonal tightness being compounded by a short-term drop in milk production due to heat, and the market certainly doesn’t seem to expect follow-through buying as the market re-balances.

With the holiday season near, the demand picture should become clearer. The latest buzz out of New Zealand seems to be favorable as weather continues to cooperate, resulting in Fonterra raising its forecast to reflect a 5 percent milk production increase year over year. 

Spot session results:

Block cheese: $1.84 (up 2 cents)

Barrel cheese: $1.8125 (up 1.25 cent)

Grade A NFDM:  $1.82 (up 0.5 cent)

Butter: $1.45 (unchanged)

In the grain complex, corn futures settled slightly higher up 3 ½ cents to 472 ½ in December while beans settled up 3 ¼ cents to 1358 ¼ in November. This session could best be described as lackluster with traders anxiously awaiting the USDA monthly production estimate on Thursday. According to Reuters, private analyst Lanworth puts corn & soybean yields at 152.2 & 40.4 bushels per acre, respectively.

This morning, grains should open steady to 6 lower across the board, pulling back a bit from yesterday’s gains.

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