Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.
We came back from the long holiday weekend expecting that it would be a very busy, intriguing dairy session due to both the interesting activity in the spot market late last week and the GDT auction early yesterday morning. That intrigue didn’t amount to much, though, as the GDT auction was sideways to slightly lower, while the spot session opened and closed with no activity to speak of. Understandably, volume was light ahead of the GDT announcement and spot session, but things failed to pick up much afterward. Despite seeing a bit stronger trading volume in the 2014 months, we were still under 800 total contracts for the day. We did see some selling pressure enter the market just after spot with Oct. trading to as much as 25 lower, while Nov traded to 19 lower. That pressure subsided throughout the afternoon, however, and at settlement the 2013 contracts were 2 to 8 lower, while the 2014 contracts were 3 to 13 higher on the day. The recent rally back to the mid-$1.70s for the domestic spot market, in combination with a slightly weaker GDT auction, puts the cheddar market back near a more normal spread.
Spot session results:
Block cheese: $1.7825 (unchanged)
Barrel cheese: $1.77 (unchanged)
Grade A NFDM: $1.80 (unchanged)
Butter: $1.435 (down 0.25 cent)
In the grain complex, the corn market faded to as much as 10 lower before finding some support and rebounding slightly. Dec. corn finished down 6.75 cents at $4.7525, while Nov. beans were some 25 cents off their high but finished up 29.25 cents at $13.8675. Today’s action opened the Dec. corn vs. Nov. bean spread up some 37 cents, and it sits at unprecedented levels nearly a 2.95-to-1 ratio. To give you an idea heading into spring a normal new crop ratio usually lands between 2.0 and 2.2. This will certainly have to correct in some manner as we move forward, but the market wants confirmation that there are enough beans out there. That may happen as harvest gets going in the coming weeks, but watch out for a potential frost scare ― right now there is nothing in the forecast.
This morning, we look for corn to open 3 to 6 cents lower and soybeans to open 18 to 22 lower.
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