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

Class III futures settled anywhere from -7 to +3 on Friday on what could be described as volatile week with both near limit down and up days. With all of the volatility, the Oct to Dec pack closed up 21 cents on the week at 18.22, while the Jan to March pack was also higher by 19 cents closing at 19.64.

The September Milk Production report released Friday afternoon after the close of trading had a slightly bearish tone ― although we saw a 0.5 percent decline in 23-state production, the market consensus was we would be seeing a decline somewhere 0.8 to 1.0 percent range. Some important things to note on this report is that fact that Idaho continues to post increases (2.3%) out West, while most western producing states continue to see declines. Although the western production has slipped, the Midwest region has seen some steady gains with Michigan and Wisconsin posting gains of at least 2.8 percent. Total U.S. milk production was down 0.5 percent; U.S milk cows down 27,000, and milk per cow was down 7 pounds.  

Overall, the fundamental news has been mixed with both demand being firm but supplies adequate for the time being. Despite the spot and Class III futures volatility, little has changed fundamentally with the market mostly in balance for the time being. The Cold Storage Report will be released this afternoon.

For the week ending October 6, dairy cow slaughter under federal inspection was up 11.8 percent at 63,400 head, compared with the same period the previous year. Year-to-date slaughter levels are 6 percent higher than 2011 levels, with 2,351,500 head slaughtered.

Grain futures in general last week felt price pressure early on, stabilized and rebounded.

There is concern over South American weather; Chinese demand remains firm, and U.S. bean prices remain well discounted to those on the Dalian Commodity Exchange. Even when corn prices backed off, there was little if any price discount felt to corn buyers as basis simply firmed, resulting from farmers’ reluctance to sell and the market having to force product out by firming the basis up. 

We look for corn to open 2 to 4 cents higher and for beans to open 14 to 16 higher.

Block cheese: $2.00 (unchanged)

Barrel cheese $1.9175 (unchanged)

Butter: $1.88 (unchanged) 

Grade A NFDM: $1.56 (down 3 cents)

These data and comments are provided for information purposes only and are not intended to be used for specific trading strategies. Commodity trading is risky and FCStone Group, Inc., INTL FCStone Inc., and their affiliates assume no liability for the use of any information contained herein. Although all information is believed to be reliable, we cannot guarantee its accuracy and completeness. Past financial results are not necessarily indicative of future performance. Any examples given are strictly hypothetical and no representation is being made that any person will or is likely to achieve profits or losses similar to those examples. References to and discussions of exchange traded products are made solely on behalf of FCStone, LLC. References to and discussions of OTC products are made solely on behalf of INTL Hanley, LLC, and OTC products are only available to eligible counterparties.