Schwieterman: Corn surges on rumors of purchases by China

Corn                                                 Estimated Fund Position
Trends
Short Term: Down                        Net Long Futures and Options: 103457
Long Term: Down                         Change: +14000
Overnight Trade: N +4 1/4 Z +3/4
Opening Calls: 3-5 Higher

The corn surged higher overnight and built upon those gains overnight based on ideas that the Chinese have purchased large quantities of corn. There has been no confirmation by USDA that these purchases have been made and lack of confirmation today could make for volatile trade. The charts suggest that at least a temporary bottom has been made. Look for the December contract to test the $5.50 level soon.

Wheat                                                Estimated Fund Position
Trends
Short Term: Down                           Net Long Futures and Options: -89985
Long Term: Down                            Change: +3000
Overnight Trade: Chicago: N -3/4 KC: N - 1/2
Opening Calls: Mixed

Wheat futures were quiet overnight. After chasing the corn higher yesterday there was little buying interest left. French wheat is nearing the recent highs, which should be supportive, but we have to see much, much better export sales to absorb the big crop that is coming on. After the July corn contract goes off the board, there won’t be much left to support the wheat. Sell December wheat calls.

Soybeans                                             Estimated Fund Position
Trends
Short Term: Down                              Net Long Futures and Options: 203692
Long Term: Up                                     Change: +4000
Overnight Trade: N +5 3/4 X +6 1/2
Opening Calls: 5-7 Higher

The soybeans continue to trade sideways. The overbought condition of the market has been relieved by going sideways and the market is due for another move higher. Demand is too strong to be ignored and the potential for extremely tight stocks in the next crop year is very bullish. The best way for this market to avoid shortages next year is to buy acres from the corn. It is getting a little late to get that done, which leaves demand rationing to avoid shortage.

Live Cattle
Trend
Short Term: Up
Long Term: Down
Opening Calls: 30-50 Higher

Live cattle futures closed moderately to sharply higher on Thursday, leading to solid cash gains in the north for the week. Cash in western Nebraska reached as high as $125, with sales in the east $199-$200. The improved cash trade has remaining show lists priced $124+ in the south and $200+ in the north. Beef exports for the week were above 20,000 mt, providing additional support to complex. Beef cutouts now exceed week ago levels by more than nine cents per pound. A positive on feed report this afternoon should keep the ball rolling higher. Overnight action is supportive, with the front four months .70-.85 higher.

Feeder Cattle
Trends
Short Term: Up
Long Term: Down
Opening Call: 20-40 Higher

Feeder cattle futures closed mixed on Thursday, as sharply higher corn prices limited the bullish enthusiasm of the live pit. Overnight buying picked up, with feeders .25-.50 higher as we write. Corn is once again gaining price support, which could limit upside potential in the yearlings. Trade is expecting March placements to come in at least 7% lower than a year ago. Early reports suggest that April placements could be off even more than the March.

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