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

December 2014 FMMO Class II, III & IV prices are announced today by USDA.

Class III futures continued to rally yesterday as the spot cheese market moved higher. January-August Class III prices were 17¢ to 38¢ higher on the day. Volume was relatively firm. The next few sessions will likely tell the story as to whether this is a short-term correction, or if this rally actually has some legs to stand on. An upside breakout could put us on target for something in the low $16s.

Cheese futures finished higher as well, January through September 2015. Spot cheese will continue to set the tone, and the market looks to be expecting barrels to close the gap vs. blocks to correct spread.

Dry whey futures look to be settling into the upper 30s, and prices were higher across the board yesterday, helping spur the Class III market.

Spot NFDM and butter markets both closed unchanged yesterday. However, strength in the spot cheese and Class III markets spilled over into the butter and NFDM futures markets. NFDM futures were steady to 4¢ higher, while butter futures were steady to 3.25¢ higher through 2015 – with one exception, March.

The gains in the Class IV products meant a mostly higher Class IV futures market, as the December 2014 through July 2015 was steady to 19¢, with March again the lone exception. If the Class III market continues to find support, we’d look for the same to occur on butter and NFDM futures, although it’s tough to get our hopes too high with declining exports and the US D setting fresh highs.

 

Dec. 30 spot session results:

Block cheese: $1.5200 (up 2.5¢)

Barrel cheese: $1.4275 (up 0.75¢)

Grade A NFDM: $1.0000 (unchanged)

Butter: $1.5550 (unchanged)

 

Today's expectations:

• Class III & Cheese futures to open steady to slightly higher

• Class IV futures to open steady

• Butter & NFDM futures to open steady to higher

 

Grain futures

After opening mixed, grains closed lower onTuesday.

 

Wheat was the downside leader, dipping below 20-day and 200-day moving averages. The Russian export tax may have been a short-term boon, but it appears other countries are in line to export before the U.S. would see any significant demand, and all the tax will likely serve to do is to delay exports until the tax expires later in the year. Soybeans also finished the day lower.

Once the market returns from the holiday we’d expect all eyes to be on USDA’s January Crop Production and Grain Stocks reports. This report could certainly provide a shock, with debate over USDA and Farm Service Agency acreage differences, and on-farm storage guesses up in the air.

 

Today’s expectation:

• Corn and soybean futures to open lower

 

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