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

The story of last week was the dairy futures’ inability to rally despite higher spot cheese pricing. On the week blocks were up 2¢, while barrels gained 0.5¢, while the February Class III contract lost 64¢ and the Q2 2015 pack average fell 59¢. The physical market seems to have plenty of blocks to offer, while barrels seem a bit tight.  

Cheese futures closed the week mixed, with February through June lower, but July through December were higher. February lost a whopping 6.2¢, settling at $1.5170/lb., while the Q2 2015 pack was down 5¢, settling at $1.5690/lb.

 Dry whey futures were mostly lower throughout the week and closed mostly lower on Friday, as well. January settled up, but that was the lone contract to post a gain. We’ve heard chatter of lactose prices falling into the 20s in some places, and that doesn’t bode well for whey pricing.

Class IV futures closed out the week steady to lower on moderate volume. February futures closed 46¢ lower on the week, following the Class III market to the downside.

NFDM futures closed out the week lower on extremely heavy volume. With butter prices finding some stabilization, it may mean additional Class IV production, and that leaves little doubt that it would be bearish for the powder market.

Butter futures finished the week higher on good volume. Buyers seem to be ready to step in at current prices, seeing good value after the record high prices seen in 2014.

 

Jan. 9 spot session results:

Block cheese: $1.5900 (up 1.0¢)

Barrel cheese: $1.5450 (unchanged)

Grade A NFDM: 98.75¢ (down 1.25¢)

Butter: $1.5400 (unchanged)

 

Today's expectations:

• Class III to open modestly lower.

• Cheese futures to open lower

• Dry Whey futures to open mixed

• Class IV futures to open lower

 

Grain futures

Last week was relatively tame in terms of price movement, as the market set itself up for USDA releases of annual Crop Production and quarterly Grain Stocks reports this morning (Jan. 12). Given the wide range of ideas on total acreage, and the fact  stocks have been all over the place the past few years due to increased private storage, this one could provide a shocker in either direction. Look for analysis shortly after the 11 a.m. (Central) release.

 

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.