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

USDA’s Milk Production Report is slated for release today at 2 p.m. (Central).  Market expectations are fairly widespread, with an increase in the range of 3.0%-4.5%. FCStone is looking for a number in the lower end of the range, near 3.2%.

Class III futures trading volume and price action took a breather Tuesday as the market consolidated recent losses. The weaker GDT index and falling block price did not cause additional panic selling, but rather a mostly orderly two-sided trade. The January-December 2015 Class III average continues to hover around the $17.00/cwt. level.

The GDT auction left the global price index down 3.1% as weakness in powders resumed, offsetting any gains seen in cheese and butter. Yesterday’s auction posted the lowest price levels since August 2009, so our original ideas that GDT was finding some stability were quashed.  Overall, however, our view is that GDT downside is more limited at current levels, and that prices will carve out some level of equilibrium in the coming auctions. 

Spot activity was weaker again. While we’ve heard and reported on fresh block cheese availability over the past week, it was barrel cheese that seems more widely available than blocks recently.  However, barrels remain perched over $1.90/lb. while blocks made a new low of $1.85/lb., a price not seen since Nov. 25, 2013.

Cheese futures traded in similar fashion to Class III. The current January-December 2015 cheese average is $1.7366/lb.

Dry whey finished Tuesday mixed, leaving the 2015 average at 46.16¢/lb.  We expect the market to show more weakness in the nearby contracts.  The 2015 contracts appear to have found some level of equilibrium for the time being.

Class IV futures pushed new lows amid weakness in both NFDM and butter futures. Class IV has been rather quiet over the past month or so but that has not stopped the market from trending lower. The short-term bounce we looked for several days ago on NFDM came and went.  Weakness in both SMP and WMP during GDT auction may have inspired fresh selling for U.S. NFDM. Butter futures have been choppy and sideways, but we are looking for another run towards the $1.80/lb. mark on spot butter, and with that we ought to see some additional futures price pressure. 

Nov. 18 spot session results:

Block cheese: $1.8500 (down 3.0¢)

Barrel cheese: $1.9150 (unchanged)

Grade A NFDM: $1.1875 (down 0.5¢)

Butter: $1.9875 (unchanged)


Today's expectations:

• Class III, Cheese & Dry Whey futures to open mixed

• Class IV, Butter & NFDM futures to open mixed


Grain futures

The grain complex was largely lower yesterday on light volume. We look for more weakness as prices on both corn and soybeans are poised to clear their 20-day moving average.


Today’s expectation:

• Corn futures to open lower

• Soybeans and soybean meal to open lower


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