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

The Class III market continued its quiet retreat from Tuesday’s high price points yesterday during another lackluster day of trading volume. 

Seven hundred and seventy-three contracts changed hands as prices faded by the close to settle 1 to 10 lower. Although the spot cheese prices have edged higher all week on good broad-based buy interest, the futures have run a substantial premium to cash. This has allowed market participants to cool off or even second-guess the market over the past two trading sessions. The way we see it, however, is that spot will not pull futures lower, but rather futures will continue to pull spot prices higher into the weekend and likely into next week as well.  

This has been a pivotal week. We’ve gone from a rather quiet trade in which weaker domestic demand and higher cheese inventories culminated in a widely bearish market sentiment to a more uncertain price forecast. We hear fresh cheese is still widely available, and we don’t expect this afternoon’s June milk production numbers to be down dramatically, but demand is kicking up a notch ― and in doing so is absorbing that product. Heat, export demand (both realized and potential) and higher international prices have put domestic buyers back on guard. Although this is not typically a busy demand time of year, it does appear that buyers are trying to “get out in front” of something. If that is the case, expect firming Class III and cheese futures.

Spot session results:

Block cheese: $1.70 (up 0.75 cent)

Barrel cheese: $1.69 (up 1 cent)

Grade A NFDM:  $1.755 (unchanged)

Butter: $1.49 (up 0.75 cent)

In the grain complex, corn finished only slightly lower, while soybeans finished with double-digit losses Thursday. Weather is the driver for the grain markets right now, and the perception is the majority of the Corn Belt is experiencing favorable weather. The only area of concern is the southwestern part of the belt which is showing some signs of stress and the forecasts are for hot and dry the next 6 to 10 days. 

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

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