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

The price volatility certainly didn’t come to an end during yesterday’s session, but by the end of the day prices didn’t see as large of a change in nearby months as it had over the past three sessions. March to May were up 10 to 20 cents, while deferred contracts were steady to 10 higher. The intraday movements during the session, however, were something to see as prices early morning tested double-digit losses only to see double-digit gains going into the spot session. As both blocks and barrels were being bid higher, futures skyrocketed with April touching over 50 higher, then came a flurry of trades and futures dropped back to single-digit gains. By the close of the spot session, it was clear that higher was going to be the direction for the day, but futures again caught a bid and moved to 40+ cent gains around mid-day and then the last move of the day was easing off of the highs and back to the settlement prices. All of those price swings encouraged massive volume of 2,646 contracts on the day. Once again, open interest did increase, but only slightly in comparison to overall volume.

All of this volatility, all of this volume and seemingly little to nothing has changed in terms of the news or underlying fundamentals from last Thursday afternoon. There is a lot of milk out there making its way into production of all dairy products, but barrels have been reported as a little tight, which may have been reason for a slight bounce in spot and perhaps futures as well with some belief that whey prices could rebound. We are still confined to the range bound trade in the spot market, however, and whey prices continue to chop sideways to mostly lower.

On the heels of Tuesday’s softer corn and wheat prices, heavy fund selling was the highlight of the grain markets yesterday. Corn was once again unable to punch through the recent range and has now returned to toward the midpoint of that range. May corn lost 15.25, closing at 638.75. The soybean market remains strong in relation to the grains, but closed lower with May down 8.5 cents yesterday to 1326.75. Fear remains that higher prices will need to be seen heading into the March 30 report, but more acreage can be gained for soybeans as prices fall as well!

Look for corn to open 2 to 5 cents higher and beans to open 4 to 7 higher.   

Daily CME spot market prices:

Block cheese $1.485 (up 2.5 cents)

Barrel cheese $1.4725 (up 1.5 cent)

Butter:  $1.45 (unchanged)  

Grade A NFDM: $1.2675 (unchanged)

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