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

 

After four consecutive corrective sessions that saw nearby Class III contracts recover from fresh lows, the market collapsed under the weight of a bearish Cold Storage report for cheese, a lower spot session, and technical failure at resistance levels that brought the bears out in earnest. By the closing bell, the January contract had cratered 52¢, followed closely by the February contract, which shed 45¢. The Q1 2015 pack average dropped 43¢, settling at $15.56/cwt. Late-session buy-side interest did come into the market after the close of pit trade, lifting Q3 2015 into the green.

With a plethora of bearish sentiment weighing on the market, expectations for another leg lower are rapidly presenting. It’s one thing for a market to drift and swing in “holiday mode,” but volumes have been impressive given the time of year, and recent volatility cannot be chalked up to be just a thinly-traded seasonal market.

Cheese futures came under pressure after Blocks were offered 4¢ lower, to $1.59/lb., and Barrels traded 3¢ lower, to $1.5350/lb. In all likelihood, the lower price action was a harbinger of things to come, and also justified by the Cold Storage report.

With the exception of the January and February contracts, sell-side interest hit the dry whey market and drove prices lower through the balance of 2015, with sporadic weakness on out into 2016.

Class IV futures traded mixed as the market continues to consolidate from recent price pressure and weighs mixed signals from its components. Both butter and NFDM futures were mixed on the heels of spot prices remaining unchanged. For the time being, it appears both have found support levels, with end user interest supporting the butter price in the $1.60/lb. range. Much the same can be said for NFDM, as stability north of the $1.00/lb. mark has given temporary traction to the market after coming under pressure earlier in the month.

 

Dec. 23 spot session results:

Block cheese: $1.5900 (down 4.0¢)

Barrel cheese: $1.5350 (down 3.0¢)

Grade A NFDM: $1.0025 (unchanged)

Butter: $1.6250 (unchanged)

 

Today's expectations:

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

• Class IV, Butter & NFDM futures to open mixed

 

Grain futures

If there is a market in “holiday mode” to speak of, it would be the grain trade. The corn market is content to plug along in sideways to higher trade, however further advances will likely be met with farmer selling. The March contract posted a 2.25¢ gain yesterday, to close at $4.14/bushel, and within earshot of its 200-day moving average of $4.21/bushel. Soybeans settled mixed, with nearby contracts fractionally on either side of unchanged.

 

Today’s expectation:

• Corn and soybean futures to open slightly lower

 

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