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


The market opened weaker despite a USDA milk production report deemed “bullish” in comparison to market expectations. Spot cheese was the defining point of the day. Overnight prices are down 10¢ to 25¢ on a bearish Cold Storage report for cheese released after the market close yesterday. 

Cheese futures traded similarly to Class III, with January having the most volume and the most strength. The whey futures market was choppy, although the underlying market is still soft. Export interest is light, and end users are not enthusiastic about taking a position. Some processors are switching more production to dry whey, at the cost of higher protein products.

Class IV futures have been acting as a reconciliation trade for the butter and NFDM markets.  Most of the price discovery type trading has been isolated in the butter market.  Spot Butter settled up on two trades. Butter futures were largely mixed across the board. Retail and foodservice demand is moderate to strong, although it’s noted orders are slowing compared to previous weeks. Processors are looking into switching more production to bulk butter. 

 The NFDM futures featured a steady to slightly higher bid across the board. Some manufacturers are discounting product in the spot market to manage their end of year inventories. NFDM plants are expected to see higher volumes of milk intake as bottling demand slows down. Inventories of NFDM are growing, but some manufacturers will be filling large orders in January, which will keep their inventories manageable..


Dec. 22 spot session results:

Block cheese: $1.6300 (up 2.0¢)

Barrel cheese: $1.5650 (up 1.5¢)

Grade A NFDM: $1.0025 (unchanged)

Butter: $1.6250 (up 1.5¢)


Today's expectations:

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

• Class IV & Butter futures to open mixed

• NFDM futures to open steady to higher 


Grain futures

The grain markets showed lower wheat and higher soybeans, with corn stuck in the middle. News wires reported Russia would impose grain export duties to curb food inflation. The trade discounted these reports, with many believing that although there will continue to be restrictions, a complete shutdown of exports is not in the cards. Lower energy prices have tightened ethanol margins. Expect corn to continue to chop through the New Year, but it looks poised for some near-term strength. Soybeans continue to move higher as export inspections continue to run above last year. If they continue, we will see projections start to increase.  Soybean meal is very much sideways, looking for a breakout in direction.


Today’s expectation:

• Corn and soybean futures to open modestly 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.