Class III and butter futures edge higher amid quiet spot

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

Class III opened lower Monday on follow-through selling from Friday and a palpable anticipation of further spot price declines. But after Friday’s precipitous fall for spot cheese prices, Monday was a dud. 

Blocks were offered down .25 cents to $1.4925 and barrels finished unchanged at $1.4600.  Class III futures wasted no time fighting back to unchanged, finishing near or on their intraday trading highs from May to December on a moderate volume of 1,267 contracts. Volume was much lighter than that of Friday’s sell-off, but Monday’s technical action was somewhat bullish in nature for Class III.  However, Open Interest decreased during the run-up, as May saw a large amount of short covering drive the rally.

Sources are mixed at best on cheese prices at current levels and, though GDT showed a sharp decline last week, current domestic demand needs generally seem to outrank such figures. While we expect more selling in the spot session, we don’t feel buyers have stepped away and therefore expect a good two-sided trade at current levels.

The grain complex traded mixed to start the week, with corn trading lower and beans and wheat firming a bit. The trade is waiting for this Friday’s Grain Stocks and Prospective Plantings Reports and trading largely sideways because of that. However, corn did post a slight negative trading reversal today, which ought to be noted as potential foreshadowing of price weakness to come. 

We look for corn to open 5 to 6 cents higher and for beans to open stronger up 4 to 8 cents.

Daily CME spot market prices:

Block cheese $1.4925 (down 0.25 cent)

Barrel cheese $1.46 (unchanged)

Butter:  $1.5225 (unchanged)  

Grade A NFDM: $1.2675 (unchanged)

These data and comments are provided for information purposes only and are not intended to be used for specific trading strategies. Commodity trading is risky and FCStone Group, Inc., International Assets Holding Corporation, and their affiliates assume no liability for the use of any information contained herein. Although all information is believed to be reliable, we cannot guarantee its accuracy and completeness. Past financial results are not necessarily indicative of future performance. Any examples given are strictly hypothetical and no representation is being made that any person will or is likely to achieve profits or losses similar to those examples. References to and discussions of exchange traded products are made solely on behalf of FCStone, LLC. References to and discussions of OTC products are made solely on behalf of INTL Hanley, LLC, and OTC products are only available to eligible counterparties.




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