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

Class III futures continue to show reluctance to stray from current levels. Much of last week’s volatility has been sapped out of the market, despite the persistent erosion in spot prices and trade that is beginning to show early signs of slumber and “holiday mode”. The market has experienced compressed ranges and lighter volume of late, but that might actually be healthy, given the sharp losses incurred over the past couple of weeks.

Bearish headwinds are blowing and could pick up steam moving forward into 2015. The latest downdraft to domestic price sentiment stems, in part, as Fonterra again trimmed its farmgate price from $530/kgMS to $470/kgMS this week. The move is a reflection of the glut of available global supply. Other factors weighing on the market have been well documented, such as the Russian dairy ban, complacent Chinese purchasing as they work through inventory levels, strong production in Europe and Oceania, and a U.S. Dollar index that has pushed to five-year highs, further curbing U.S. exporting capabilities. 

Class IV futures managed to post sporadic, incremental gains on the heels of a sharply mixed trade in butter and NFDM markets. However, as the spot price for both came under pressure, nearby contracts shed value and closed in the red.


Dec. 10 spot session results:

Block cheese: $1.5800 (unchanged)

Barrel cheese: $1.4750 (down 1.5¢)

Grade A NFDM: $1.0975 (down 1.25¢)

Butter: $1.9200 (down 6.5¢)


Today's expectations:

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

• Butter, NFDM & Class IV futures to open mixed


Grain futures

Grain markets came under pressure and slipped into the red after yesterday’s USDA World Ag Supply & Demand Estimates report, which failed to provide much in the way of support despite both corn and soybean carryout numbers coming in short of average trade estimates.

March corn continues to trade range bound, as it has since the beginning of November, shedding 1.5¢  to close at $3.9375/bushel. January soybeans were initially able to break through resistance at the $10.50/bushel mark before reversing to close 17.25¢ lower, at $10.32/bushel.

Today’s expectation:

• Corn & Soybean futures to open slightly higher


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.