Schwieterman: April live cattle contract makes new highs

GENERAL COMMENTS:
The stock market reached the highest level since early August, which could be a bullish sign despite our high unemployment and the continual bad news out of Europe. One of the major supporting factors Friday was the idea that there was progress being made on the Greek debt problem, but we have seen good news turn bad over a weekend many times before.

The US Dollar Index fell to the lowest level since early September, due in part to strength in the Euro. The new low for the move looks a little ominous on the charts and suggests that we may be headed down to the 74 area in the next few weeks.

CORN:
Trend: Short Term Up – Long Term Down
Sentiment: Slowly Climbing

After seven days of consolidation the December corn broke out to the upside early Friday, but ended up giving back all of the early gains and finished the week only 9 ¼ cents higher. Despite the poor performance on Friday, the overall pattern in the corn is still up and breaks are for buying.

The corn market fundamentals are improving. Export sales have been over 1 MMT for three consecutive weeks and ethanol production has made a major rebound. With just a few more weeks of solid demand will become very obvious that USDA has underestimated demand for corn. There is also still the concern that USDA will have to cut the yield estimate in the next report. Yields may be better than expected, but it doesn’t appear that they are better than the current USDA estimate. It could turn out that the November supply and demand report is very bullish.

Action: Buy the December corn $6.50 - $7.00 bull call spread and sell the $6.00 put for a net cost of about 8 cents.

WHEAT:
Trend: Short Term Up – Long Term Down
Sentiment: Very Choppy

The December KW pushed through the pre-report highs on Friday, but like the corn ended up with a poor close on the day. For the week the December KW gains 15 ½ cents, which isn’t terrible, but Friday’s poor close is a good indication that we will see the very choppy pattern continue in the wheat.

There isn’t much fresh fundamental news for the wheat. Export sales are adequate, but nothing more. The drought monitor shows the same old story that nobody seems too concerned about. The ending stocks estimate is more than adequate and according to USDA we have nothing to worry about, so nobody is.

We are in a situation where the wheat will have to see gains in the corn in order to trade higher. I think we have shifted psychology back to where wheat isn’t dragging corn lower any more, but rising corn will result in more wheat being fed, which is supportive.

1. New animal identification rules aid disease traceability
2. Oklahoma producers have access to new OQBN tool
3. Survey reveals most Americans in favor of COOL
4. Oil ends higher on weaker dollar, supplies weigh
5. Purdue's beef evaluation program receives 10,000th bull
6. Corn planting pace turns from record slow to record fast

1. Michigan hay buyers should plan purchases early
2. U.S. cattle placements rise in April as feed costs subside
3. Ag markets were mixed to start the new week
4. Corn planting pace turns from record slow to record fast
5. Drought losses in Oklahoma top $400 million for 2012
6. Corn and soybean prices continue to retrace 2012 drought rally

1. Tyson selects panel to monitor animal welfare program
2. BeefTalk: How do we get the next generation to raise beef?
3. 2014 Farm Bill: Are we near an agreement?
4. Farm bill and immigration reform action needed
5. Boxed beef hits record highs, cattle weak to lower