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

The bears slashed and burned through the Class III market to open December, driving months through mid-2015 deep into the red. The 1Q 2015 pack suffered the brunt of the onslaught, shedding 68¢ to settle at $15.92/cwt. Residual weakness took 2H 2015 contracts double-digit lower, as well, all on record volumes of more than 4,000 Class III contracts changing hands.

Yesterday’s performance has me wondering if the market has put in a short-term bottom, or if it will lead to further price erosion? The aggressive nature of the session and the shocking volume totals have the hallmarks of an exhaustive move, especially when considering it comes on the heels of successive weakness over the past week or so. Granted, bearish headwinds continue to permeate through the market and weigh on the psychology of the trade. Technically, the market looks oversold, so be on the lookout for a short-term bounce.

In sympathy with Class III, a strong showing by the bears drove cheese futures sharply lower, despite a 2.75¢ pop to the upside for the block price. Prices tumbled into the red through 2015, bringing the 2015 pack average sub $1.70/lb.

Dry Whey futures also succumbed to selling pressure through 2015.

Stress cracks in Class IV futures became more visible, as the market moved sharply lower, on the heels of weakness stemming from butter and NFDM markets.

Butter futures responded to an eroding spot market by legging lower through the bulk of 2015. Spot prices had held in the vicinity of $2.00/lb., but have slipped to levels not seen since the beginning of November.

Despite a steady spot market that left the price stagnant at $1.1150/lb., NFDM futures tracked lower. The bulk of the downside pressure hit contracts through the first half of 2015.

 

Dec. 1 spot session results:

Block cheese: $1.7100 (up 2.75¢)

Barrel cheese: $1.6475 (unchanged)

Grade A NFDM: $1.1150 (unchanged)

Butter: $1.9225 (down 4.75¢)

 

Today's expectations:

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

• Class IV & NFDM  futures to open lower

• Butter futures to open steady to higher

 

Grain futures

Grain markets opened December on solid footing. By the closing bell, both corn and soybean futures posted  penny gains on moderate volume. Export inspections were basically a non-event, as corn came in within expectations, but soybeans registered on the light side. Both markets were propelled higher by the explosive price action in wheat. News that Russia may curb future exports, as well as domestic and international weather concerns, sparked another round of short covering by funds and propelled the market to five-month highs.

 

Today’s expectation:

• Corn futures to open lower

• Soybeans, soybean meal to open lower

 

The trading of derivatives such as futures, options, and swaps may not be suitable for all investors. Derivatives trading involves substantial risk of loss, and you should fully understand those risks prior to trading. Any reference to past performance is not indicative of future results. All references to futures/options trading are made solely on behalf of FCStone, LLC. All references to swap execution and bi-lateral swaps are made solely on behalf of INTL Hanley, LLC. FCStone, LLC will clear swaps when applicable. Swaps are only available to eligible counterparties. All observations of economic, political and/or market conditions are not intended to refer to any particular trading strategy, promotional element or quality of service provided by INTL FCStone Inc. and its subsidiaries and should be construed as market commentary. All recommendations to buy or sell a specific derivative or forecasting statements regarding market activity and the pricing thereof should be construed as a solicitation in any jurisdiction in where such an offer or solicitation would be legal. Proper context and guidance including but not limited to the particular trading objectives, financial situations and the needs of the intended audience were taken into consideration when this recommendation was prepared. Contact your account representative for specific advice to meet your specific trading preferences or goals. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by INTL FCStone Inc. and its subsidiaries. Sources of information believed to reliable were used in preparing such observations, and no guarantee or representation regarding the accuracy of those sources has been made. INTL FCStone Inc. and its subsidiaries are not responsible for any redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material.