Schwieterman: Cash strength leads cattle futures higher

Corn                                                      Estimated Fund Position
Trends
Short Term: Down                             Net Long Futures and Options: 108457
Long Term: Down                              Change: -8000
Overnight Trade: N -1 1/4 Z +1 1/2
Opening Calls: Mixed

The July corn made another new low for the move overnight and still looks like it is headed to the $6.02 support. Yesterday the December contract held at the March low and made a decent bounce amidst active bear spreading. The planting progress number wasn’t as high as expected at 17%, which supported the December contract again overnight. Plan on two sided trade today with more bear spreading early in the session. If $6.02 holds in the July contract today, a bottom is in.

Wheat                                                       Estimated Fund Position
Trends
Short Term: Down                                  Net Long Futures and Options: -91985
Long Term: Down                                   Change: -1000
Overnight Trade: Chicago: N -1/2 KC: N -3/4
Opening Calls: Mixed

When you best hope for a rally is that trading funds might stop selling soon, you know there isn’t much bullish news to work with. French Milling wheat is higher this morning, keeping US wheat the cheapest in the world. Export sales have been ok, but not big enough to keep stocks levels down. Winter wheat ratings improved to 64% Good to Excellent, which tells us the crop is getting bigger. 19% of Kansas wheat is headed compared with none on average, which makes our best chance at a rally a late freeze.

Soybeans                                                    Estimated Fund Position
Trends
Short Term: Down                                    Net Long Futures and Options: 205692
Long Term: Up                                           Change: +4000
Overnight Trade: N -14 1/4 X -12 1/2
Opening Calls: 10-15 Lower

Soybeans were under pressure overnight and the July contract is testing the support at the bottom of the range. We have seen good buying interest from China and “unknown destinations,” which will keep a bid under the market. Trend line support in the July contract is at the $14.04 area today, which is a potential downside target the next few sessions.

Live Cattle
Trend
Short Term: Up
Long Term: Down
Opening Calls: 10-30 Higher

Live cattle futures posted sharp to moderate gains on Tuesday, led higher by the April contract and anticipated cash strength. Friday’s on feed report is expected to show a 7-8% reduction in placements, which could boost deferred live futures. Beef prices remain on fire, with choice and select now up nearly 5.00 for the week. Overnight trade is modestly higher, with macros working against the market.

Feeder Cattle
Trends
Short Term: Up
Long Term: Down
Opening Call: 20-50 Higher

Feeder cattle futures have now rallied nearly 6.00 in the last five trading days. Triple digit gains on Tuesday were supported by lower corn and higher fat prices. Cash trade is trending higher in the country, with index levels officially on the rise. We expect further strength heading into Friday’s monthly on feed report. Overnight trade is between .30-.50 higher. Cattle feeders should consider owning Call option on future inventory.

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