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

There was light volume last Friday, but decent volume for most of the week and it was in higher fashion.

With seasonal peak volumes, will prices crumble or hold tough?  The CME spot cheese market has stopped falling. The barrel has moved up to correct the spread imbalance, but it hasn’t shown any bull horns. Butter has started to break and that was the early year bull leader.

Dairy cow slaughter under federal inspection was up 6.9%, at 54,200 head, compared with the same period the previous year. Year-to-date slaughter levels are 4.7% higher than 2010 levels, with 1,878,400 head slaughtered.

Prices firmed on the week in all milk and cheese contracts and that is a reversal from recent lower weeks. Cheese buyers are nibbling away and providing widespread fundamental encouragement. A spot seller that caught much attention from industry participants has also seemingly backed away and out. But what will happen and who will return following a long Holiday weekend is the question. We might find out today, but many people don’t come back till tomorrow.

Cheese futures were firm last week and closed strong. Rather than following Class III it has been more of a leader on this turn around or bear bounce of sorts having turned up before Class III and that is interesting to see and important to take note of.

Corn:  Last Thursday, the market plunged and we advised to those of you we spoke with that prices would likely regain what they lost over a few trading sessions, we were seemingly wrong as they gained almost all of it back on just one session last Friday. This is a classic choppy pre-harvest trade. 

The pressure was from weather reports of scattered Midwest rains and more so from technical black-box selling. The strength was from fundamental buying and a report from Lanworth that their estimates for yield are 40 bushels per acre for beans and a shockingly low 143 bps for corn. Technically, we are challenged to break out above recent resistance and so expect a choppy trade today.

This morning, we look for corn to open 5 to 8 cents lower and soybeans to open 14 to 17 lower.

Daily CME spot market prices:

Block cheese: $1.79 (unchanged)

Barrel cheese: $1.76 (up 2.5 cents)

Butter: $2.005 (down 6.5 cents)  

Grade A NFDM: $1.51 (unchanged)

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