Class III futures generally down Friday

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

The Class III futures closed out the week with some price weakness. The 2013 contracts slipped between 2 and 15 cents lower, while the first quarter of 2014 settled between unchanged and 4 cents lower. 

The extreme heat in the West and Northwest, and rising temperatures in the Midwest, Southeast and Northeast all point to declines in production rates and components, yet the futures market has yet to embrace this outlook. The vast availability of cheese, as conveyed in the weak spot cheese market price action, continue to draw the Class III futures contracts lower. How long this bearish trend will last is yet to be determined, but one would expect market participants to step in on the buy side at some near date in order to get ahead of the seasonal trend of price increases and production declines.    

Spot session results:

Block cheese: $1.675 (unchanged)

Barrel cheese: $1.65 (down 2 cents)

Grade A NFDM:  $1.75 (up 0.5 cent)

Butter: $1.46 (down 3.5 cents)

The grain markets finished last week’s trade with heavy selling pressure as the July contracts came off the board. The July corn contract’s final settlement price was 701.50 after shedding 15.25 cents on the day. The December corn contract dropped 17.75 cents to close out at the price of 509.25.  The July soybean contract’s final settlement price came in at 1563.25, down 38.00 cents on the day, while the November soybean contract slipped 33.50 cents lower to 1257.25. 

Crop conditions for corn, beans and spring wheat are above their five-year average, and production estimates continue to look good, strengthening the market bears’ convictions. The export sales for both the old crop corn and soybeans have already exceeded the USDA’s estimate for the entire year and there are still eight weeks to go. For now, the weather has been cooperative with producers, helping to alleviate some of the concerns generated by late planting dates, though any kind of significant weather event would put this year’s production in question and draw a sharp rally in grain prices.

This morning, we look for corn to open 6 to 10 cents lower and beans to open steady to 5 lower.

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