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

It was a tale of two markets: dairy and non-dairy. The non-dairy markets were embroiled in a “risk-off” battle resulting from the botched Cyprus bailout deal in Europe. The non-dairy markets have massive spec funds in them, tying them together in tumultuous times such as yesterday. The dairy markets, eh, not so much.

So, while risk was off in non-dairy markets yesterday, meaning prices fell in most “things” that if they fell would hurt your foot… dairy market prices firmed up and moved higher. It is nice to have an inversely correlated market ― and that is what dairy so often is to the outside markets.

Class III futures were up as much as 23 cents (April13 @ $17.38), and prices were higher all the way through Dec13 (+11 @ $18.14). Cheese futures traded 69 contracts with prices from April13-Dec13 all higher, as well, with April13 up 2.4 cents to an even $1.70. Whey prices were firm, mostly on bids with limited actual trade activity yesterday.

We have been sending you medium-term bullish sentiments from our camp for some time now. We have also been sending you increasingly bullish technical snapshots. I’ve always said that what makes the bells and whistles in my head go off is when the fundamental view and the technical view align because they look at completely independent information. Well, right now they align. We are very short-term neutral to slightly bearish as we flush, but we turn more and more bullish as the calendar looks toward May, JUNE, July and August. Oceania has no milk; Europe is low, and the U.S. can fill the voids ― just as feed-quality issues are starting to hit and months before the impact of cheaper new crop feed prices hit… watch out for a big jump up and an even bigger collapse to follow.

Spot session results:

Block cheese: $1.6125 (up 0.25 cent)

Barrel cheese $1.5875 (down 0.25 cent)

Grade A NFDM: $1.50 (unchanged)

Butter: $1.66 (up 0.5 cent)

When a market bucks an overwhelmingly strong influence, it must be recognized and corn did that yesterday. It was a fight: corn fought and tussled and slugged it out as the bulls bought and the funds tried to hold… the corn market just wouldn’t break. Corn traded down about 6 cents; the May/Dec spread lost 3 cents at one point, but all reversed and by the close funds had added about 5k contracts of longs and May closed up 3 cents to $7.20, while Dec closed up a ¼ to $5.62, allowing the old crop/new crop spread to pick up some value. We expect old crop to slowly keep gaining on new crop as has been the trend for ages now. …All this despite significant strengthening in the U.S. dollar and a commodities marketplace yesterday which saw most “things” simply lower. Beans and wheat were not so resilient, and while they closed off their lows it was only marginally so. Overnight saw grains remain firm with corn leading the way and May corn picking up an additional 5 cents on Dec, putting the spread at $1.63.

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