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

USDA will release the October Dairy Products Report this afternoon. We expect production growth in nearly every category on a monthly and yearly basis.

Day 2 of December finished much different than Day 1. Weakness in the spot cheese market spot was discarded, as Class III futures finished double-digit higher in nearby months, bringing January back to within 20¢ of pre-Thanksgiving close.

While cheese sales remain brisk, fresh cheese continues to make its way to the exchange, pushing prices lower. It is hard to argue against the fact that we have plenty of milk to meet processing demand – at a time when demand for U.S. cheese (as well as all dairy products) remains weak globally.

Part of the issue is that we have plenty of product both in the U.S. and abroad at a time when the U.S. Dollar index is strong and getting stronger. The U.S. Dollar strength is making U.S. products more expensive, even with raw prices falling.  The U.S. cheese market can become quite volatile in the next few weeks, and  headwinds facing future cheese demand heading into next year are mounting – not waning.  

Producers can and should hope for higher prices but prepare for new lows early next year. As one dairyman said to me recently, “those cows’ job description is about to change.” We would expect cull rates to increase as lower-producing animals are cleared out.

Dry whey futures finished higher on what we expect was fresh buy-side hedger buying interest.

 

Dec. 2 spot session results:

Block cheese: $1.6600 (down 5.¢)

Barrel cheese: $1.5875 (down 6.0¢)

Grade A NFDM: $1.1100 (down 0.5¢)

Butter: $1.9850 (up 6.25¢)

 

Today's expectations:

• Class III, Cheese & Dry Whey futures to open steady to slightly higher

• Class IV, Butter & NFDM  futures to open mixed

 

Grain futures

Grains finished lower. Soybean export inspections were significantly lower than expected.

 

Today’s expectation:

• Corn futures to open lower

• Soybeans, soybean meal to open lower

 

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