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

Class III prices continued to move higher early yesterday on light volume, seemingly supported on follow through from Monday and slightly stronger grain prices supporting 2013 contracts. The gains weren’t meant to last, however, as the spot session, though it closed unchanged, saw an offer appear and that was enough to move nearby milk futures slightly lower on the day.

November continues to lag other months dropping 14 cents, while other Oct to Jan contracts were 3 to 4 lower on the day. From Feb through Dec 2013, settlements were 2 lower to 5 higher. Volume was a bit lighter on the day with just over 700 contracts trading and option trading volume was off sharply, as well.

News was light outside of the spot session, but today we will get NDPSR pricing and tomorrow is likely to give a strong indication of which direction deferred contracts will be moving, as they will likely be strongly influenced by grain prices.

Grain prices were firm overnight, but never followed through during the day session as a light volume trade saw prices soften throughout the session. Corn finished unchanged at 742, soybeans down a penny at 1550, and wheat up 3.25 cents at 864.25.

Harvest is proceeding quickly with soybeans already 69 percent completed vs. 29 percent a year ago, while corn is 58 percent harvested vs. 42 percent last year. Interestingly, while reports seem to continue to indicate slightly better-than-expected yields, basis is starting to firm moderately over the past few days. Reports are surfacing of ethanol plants slowing production or shutting down with negative margins likely leading to some of the recent futures weakness despite stronger basis. It seems traders are unwilling or have no desire to put on positions ahead of tomorrow’s report. We’d look for the market to continue to chop sideways today ahead of the morning report. 

Look for corn to open steady to 2 cents lower and for beans to open 2 to 5 lower.

Block cheese: $2.10 (unchanged)

Barrel cheese $2.06 (unchanged)

Butter: $1.94 (up 1.5 cent) 

Grade A NFDM: $1.66 (unchanged)

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