Spot cheese closes down on CME

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

A little more volume yesterday than in previous sessions turned the Class III market ultimately mixed overall after being positive on the day going into spot.

Volume came in at 1347 contracts, almost double the previous session’s trades. Futures put in a mixed session despite a drop in spot cheese prices, which was surprising. In previous sessions where we have seen drops in spot cheese prices, the Class III market has reacted violently to the downside. In this particular session, though, we did not see the same type of reaction and  settled mixed, leaving the thought that the market may be still well supported at current levels. 2013 contracts were ultimately lower, settling anywhere from -.01 to down -.17 cents, and the 2014 contracts settled anywhere from up + .03 cents to down -.07. The fourth-quarter pack average settled down -.14 cents to 17.50.

Spot session results:

Block cheese: $1.77 (down 1.25 cent)

Barrel cheese: $1.72 (down 2.5 cents)

Grade A NFDM:  $1.845 (unchanged)

Butter: $1.61 (up 0.5 cent)

In the grain complex, it was another yo-yo session, ultimately ending up higher on the session. The night session saw higher prices for corn and beans, but they fell off after the morning session kicked into gear on good weather forecasts and increased yield numbers for both corn and beans.

As we are getting into harvest, we are really hearing about better-than-expected numbers for both ― we say that in regards to beans with some trepidation. There were reports out of Argentina that overnight frost could have damaged the country’s wheat crop, as well as rumors of Chinese wheat buying that supported that market thought out the session. Wheat has been stuck in a downtrend as of late, and the news created a breakout to the upside. Should we get a continuation of this break-out, funds that are net short 55K contracts (very near the record of 62.5K) will be running for cover.

Corn and beans followed suit on the move and went along for the ride. Dec. wheat futures settled the day at $6.7025, up 12 ¼ cents. Dec. corn futures settled at $4.5475, up 6 cents on the day and Nov. beans settled at $13.2175, up 9 ¼ cents on the day.

This morning, we look for corn to open 2 to 5 cents lower and beans 5 to 9 lower.

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