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

While we did see losses in the dairy complex yesterday, there was not an overall ominous tone. The market spent most of the session moving up from morning lows. Commercial buy-side hedgers continue to set budgets and secure pricing well into 2015. It is only conjecture on our part, but it makes sense when we get prices at sub-$17.00/cwt. levels and can’t break lower, because buyers are willing to jump into the market for a value play to the upside. There will likely be a time in the future where this does not happen, but this has been the pattern lately. The 1Q 2015 pack lost 4¢, to $17.01/cwt., and the 1H 2015 average settled at $16.83/cwt., down 7¢.

Cheese futures followed the spot market and traded lower after being up in the front months for most of the early morning trade. Is this the end of the holiday positioning? One would think not, and we could see more of a choppy trade as we move through November.

We continue to see the erosion of Class IV price, but on low volume. We believe that there is a lot more downside in store for this market in the weeks to come. Most of yesterday’s trade was relegated to the 3Q 2015, with the pack losing 17¢, to $16.67/cwt. If China does not move into the market in the latter part of the year, we could really see declining values.

Spot butter pinned the $2.00/lb. mark in yesterday's trade. This continues to be an active market in front of the holiday, and we do not expect this to abate anytime soon. If we move below the $2.00/lb. mark with any real force, then $1.80/lb. is in the cards again. Futures took the spot session as supportive, closing mixed.

NFDM markets remained negative across the board as the lows from mid-September were tested and failed. With eyes looking to the low $1.00/lb. level as a very real pricing scenario over the next few months, expect more downside as we move more on par with the world pricing structure.

Nov. 10 spot session results:

Block cheese: $2.1800 (down 2.0¢)

Barrel cheese: $2.1200 (unchanged)

Grade A NFDM: $1.1725 (up 1.25¢)

Butter: $2.0000 (down 0.75¢)

Today's expectations:

  • Class III, Dry Whey & Cheese futures to open mixed
  • Class IV & NFDM futures to open mixed
  • Butter to open steady

Grain futures

Grain markets took the latest USDA reports in stride. Supply and demand numbers came in largely as expected. While the news was slightly bullish for corn versus expectations, we are still dealing with a record crop and a huge increase in ending stocks. Although prices remained in positive territory, we would be remiss to call it a “strong” close, and further weakness in beans will likely weigh on corn. Soybeans construed the 47.5 bushel per acre yield estimate as slightly bearish versus expectations, and the January contract shed 11¢, closing at $10.2575/bushel.

Today’s expectation:

  • Corn to open mixed
  • Soybeans to open steady to higher
  • Soybean meal to open higher
     

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.