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

The Class III bull has been on the trot for the better part of the past three weeks, but the bear delivered a swift blow yesterday. Nearby contracts suffered sharp losses. When the dust settled, the March contract had fallen 49¢; the Q2 2015 pack shed 41¢.

Cheese futures have closely tracked the upside action in Class III, and yesterday’s downturn was likewise mirrored after the spot market failed to provide directional cues. Spot prices have stalled around the $1.50/lb. level. There’s a good deal of premium on the futures forward curve, and we expect futures will work their way lower to close the large spot/futures gap.

Sell-side interest pressured the dry whey market, with settlements mostly in the red through 2015.

The Class IV market came under fire as well yesterday, as stress cracks have given way to full blown fractures. The heaviest losses were seen through mid-year 2015; however deferred contracts remain at attractive levels from a producer standpoint.

The pullback from last week’s frothy butter futures levels continued to open the week, as the spot price was offered a nickel lower. The market has seen a respectable surge from the comfort zone north of the $1.50/lb. mark, likely on the heels of early Easter seasonal demand, as well as tight stocks that continue to underpin the market. We expect the market to challenge support levels just south of current marks in the coming days, holding until seasonal demand wanes and inventories are rebuilt.   

Bear spreading remains the theme in nearby NFDM futures; deferred months remain supported as the spot price continues to actively trade between $1.00-$1.10/lb. 

 

Feb. 9 spot session results:

Block cheese: $1.5350 (unchanged)

Barrel cheese: $1.4825 (unchanged)

Grade A NFDM: $1.0950 (down 0.5¢)

Butter: $1.7450 (down 5.0¢)

 

Today's expectations:

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

• Class IV futures to open steady

• NFDM futures to open mixed

• Butter futures to open soft

 

Grain futures

Grain markets opened the week with a push to the upside, as export inspections came in at the upper range of expectations, and traders shore up positions ahead of today’s USDA World Ag Supply & demand Estimates report (scheduled for release at 11 a.m., CST). The corn market has traded in a 50¢ range since the beginning of November. It’s been much the same story in the bean market, as sideway trade has oscillated within a o$1 range since the October harvest lows. The trade has yet to receive a dynamic that would warrant a breakout in either direction. 

 

Today’s expectation:

• Grain futures to open slightly lower

 

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