Schwieterman: Feeder cattle expected to continue struggle

Corn                                               Estimated Fund Position
Trends
Short Term: Up                            Net Long Futures and Options: 186610
Long Term: Up                             Change: -12000
Overnight Trade: Z -11 @7:30 AM

As expected crop condition ratings declined another 5 points to 26% Good to Excellent. Judging by the forecasts ratings in Iowa, Illinois, Missouri, Nebraska, Kansas, and S. Dakota will decline sharply again next week. On the charts, yesterday’s outside day down is bothersome and the follow through weakness is not a surprise. The first support the market will find is at yesterday’s low of 7.67 ¼, but keep in mind that the 38% retracement of this move up is way down at $6.90. The crop is still shrinking, so the trend should remain higher, but corrections do happen.

Wheat                                                  Estimated Fund Position
Trends
Short Term: Up                                   Net Long Futures and Options: 24225
Long Term:Up                                     Change: -5000
Overnight Trade: Chicago: Z-19 KC: Z -18 @7:30 AM

The December KW has stalled out at the $9.50 area and looks like it could be heading down to the $8.50 level. Unless we see a huge export sales report on Thursday, as long as we are seeing pressure in the corn we will see pressure in the wheat. Long term we have to look at breaks in the wheat market as a buying opportunity since the reduction in corn production will result in much higher wheat feed usage and very tight ending stocks. Wheat could be explosive this spring especially if the weather in the HRW Belt doesn’t improve.

Soybeans                                             Estimated Fund Position
Trends
Short Term: Up                                   Net Long Futures and Options: 242424
Long Term:Up                                     Change: -13000
Overnight Trade: X -35 @7:30 AM

Overnight the November soybeans tested the open chart gap at $15.68. That support has held so far and the market made a significant bounce off the overnight low. Crop condition ratings only dropped 3 points to 31% Good to Excellent, which was a little disappointing and added to the overnight pressure. The overnight low will be solid support, but the 38% retracement lies at $15.22 if it fails.

Live Cattle
Trend
Short Term: Down
Long Term: Down
Opening Calls: 20-40 Lower

Live cattle futures closed moderately higher on Monday, as traders were fresh buyers of the premium to cash to start the week. We expect to see continued support on pullbacks in this market. Longer term fundamentals and technical are pointing to strength down the road. Boxed beef movement was very active for a Monday, as retailers have started appreciating the recent fall in price. Outside market influence remains negative, with the Dollar firm and equities soft.

Feeder Cattle
Trends
Short Term: Down
Long Term: Down
Opening Call: 30-50 Higher

Feeder cattle futures closed moderately lower on Monday, in spite of the lower corn trade. Cash weakness, as buyers remain shell shocked by the gains in corn and the recent horrific closeouts in the feedlots. We continue to expect feeders to struggle, although today could favor some recovery, with corn off double digits once again. Any recovery in the October contract into the 142.00 area is a selling opportunity.

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