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

Class III and cheese futures continued to rally last Friday ahead of November’s USDA Milk Production report, as trader’s positioned themselves ahead of the report and the Christmas holiday. The milk production numbers fell short of expectations, up 3.4% nationally. FCStone was not alone in expecting a 4.0%-plus production growth; many participants we’re looking for 4%-5% growth, and USDA’s report is seen as bullish versus expectations.  Overall, however, the health of the U.S. milk supply does not seem to be in any jeopardy.  And, if the demand side of the equation continues to slow heading into 2015, 3.4% production growth will feel quite a bit heavier than it does today.

Overnight futures are leaning lower. We called for some firming action off of the report, but it looks as though the futures have adjusted enough to accept a 3.4% number. Pay attention to how these markets finish Monday. On the heels of a report, it is often more important the direction of the market on the close rather than the open.

Cheese futures posted another strong volume day on Friday, continuing explosive growth this year.

The dry whey market took a breather on Friday, trading mixed.  We expect additional futures strength for the Q1 contracts in the coming days, but overall the temperament of the market is more mixed.

Butter and NFDM bounced mildly on Friday, on moderate volume.

Through Dec. 6, year-to-date dairy cow slaughter under federal inspection was down 10.1% compared with the same period the previous year.

 

Dec. 19 spot session results:

Block cheese: $1.6100 (up 0.25¢)

Barrel cheese: $1.5500 (down 3.75¢)

Grade A NFDM: $1.0025 (down 1.0¢)

Butter: $1.6100 (up 1.0¢)

 

Today's expectations:

• Class III & Cheese futures to open lower

• Dry Whey futures to open steady

• Class IV, Butter & NFDM futures to open steady to mixed 

 

Grain futures

Grain markets wrapped up the week on soft footing, balancing the typical “holiday mode” which features less volume and less conviction on price direction with fundamental aspects that have largely held corn and soybeans range bound.

Corn finished Friday’s session fractionally mixed, but continues to hold north of $4.00/bushel. Lack of farmer selling has put a temporary bid under the market.

Soybeans have also traded sideways, finding support near $10.00/bushel. Demand for soymeal continues to underpin the market.

 

Today’s expectation:

• Corn and soybean futures to open lower

 

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