Dairy markets: Class III bounces back

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

Class III prices bounced back after a mixed open and lower morning session, with gains across the entire sector (except September) by the time the pit session closed. First-quarter contracts gained 21¢ on the day to $ 21.53/cwt., while the January-December pack gained 9¢ overall to settle at $19.24/cwt.

On a technical basis, the majority of Class III contracts tested or even surpassed near-term support levels early in the day, only to close higher after a spot session that saw continued bids for block cheese. This leaves one to believe that the recent downside activity was no more than a correction off of the highs, and we still have a probability of more upside or at least a re-test of the recent highs.

Cheese markets did very little in the way of business yesterday, and blocks and barrels both went unchanged on the day. With Super Bowl demand winding down, traders will be looking to the export market to see if overseas demand continues its pull of U.S. cheese products.

The Class IV markets were also quiet. Prices were mixed on the day settling anywhere from down 10¢ to up 1¢. This left the 2014 average down 2¢ on the day to settle at $20.92/cwt. We could see a bit of a short–term bounce as the market backs off of overbought levels. It all remains to be seen and could change rapidly if China decides to turn down powder demand as we get into the Chinese New Year at week’s end.

While spot butter was up 1¢ yesterday on one trade, the futures contracts did not take it as a sign to follow suit. Butter markets were mixed with a slight bearish lean. We will keep an eye on overseas demand as that could still be a driver for butter in the coming weeks.

Jan. 27 spot session results:

Block cheese: $2.31 (unchanged)

Barrel cheese: $2.275 (unchanged)

Grade A NFDM:  $2.05 (unchanged)

Butter: $1.90 (up 1.0¢)

 

Today's expectations:

• Class III & Cheese futures to open higher

• Dry whey to open steady

• Class IV & NFDM to open mostly higher

• Butter to open mxed

 

Grain futures

Grains showed a little sign of life early, but got into a choppy mode after export inspections came in right around expectations. The corn market traded in a 5.75¢ range all day to settle out at $4.3175, up 2.25¢ on the day. We have seen this market trade in a really compressed range for the past few weeks. This compressed pattern will continue until we get closer to the spring, when we start to get planting intention news. Beans traded both sides of unchanged to settle up 3¢ on the day to $12.8775. Deferred contracts through March 2015 were mostly negative. Stronger export numbers kept front month contracts higher through the session.

Today’s expectation:

Grains look to open mixed within 3¢ of unchanged.  

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