Schwieterman: Live cattle futures sharply higher ahead of report

Corn                                  Estimated Fund Position
Trends
Short Term: Down             Net Long Futures and Options: 122214
Long Term: Down              Change: +12000
Overnight Trade: H +1 Z -3
Opening Calls: Mixed

Export sales were good for a change at 759,900 MT and expectations are for good numbers again next week. Basis has improved in the cash market and there has been quite a bit of bull spreading in the market in response to the recent surge in demand. When expectations are so low and stocks are so tight, it doesn’t take much improvement to have a big impact on the market. On the charts, the market is oversold and due for a bounce, but it will probably take a move through $6.12 to generate much short covering.

Wheat                                 Estimated Fund Position
Trends
Short Term: Down              Net Long Futures and Options: -87766
Long Term: Down               Change: +3000
Overnight Trade: Chicago: H +1 1/2 KC: Unch
Opening Calls: Mixed

The March KW is the weak link of the grain complex. The improved export sales of 587,200 MT should help attitudes a little, but we need to see sales consistently at this level to have a market impact. As usual the wheat will follow the direction of the corn and it is likely that the wheat gets used as the short leg of spreads.

Soybeans                         Estimated Fund Position
Trends
Short Term: Down           Net Long Futures and Options: 3648
Long Term: Down            Change: +5000
Overnight Trade: H -4 X -2 1/4
Opening Calls: 3-5 Lower

Soybean export sales were great at 991,100 MT. That is the type of number we had gotten used to in recent years. That number is more than three times what we need each week, so some consistently large sales would force USDA to reverse their last cut in the export estimate, so sales numbers will obviously be critical as we move through the rest of the crop year. Yesterday’s move through the $11.92 resistance was important and today’s upside objective will be $12.10 for the March contract.

Live Cattle
Trend
Short Term: Up
Long Term: Up
Opening Calls: Sharply Higher

Live cattle futures closed sharply higher on Thursday, as traders and commercials anticipated higher cash trade. The cash broke loose in the late afternoon, with southern trade reaching $126 and the north as high as $205 from regional packers. Most of the north traded in the $202‐$203 range by 5‐6 pm. Overnight futures prices rose as much as 1.85 in the February contract and have since settled to 1.50 higher. Deferred contracts have strengthened to a lesser degree, but are now approaching early November contract highs. This afternoon’s on feed report is expected to be supportive.

Feeder Cattle
Trends
Short Term: Up
Long Term: Up
Opening Call: 50-80 Higher

Feeder cattle futures followed the fats higher on Thursday and in the overnight session. New contract highs were posted across the board. The gains in the feeders came in spite of double digit gains in corn values on Thursday. Corn was slightly firmer in overnight trade, with feeders seeing triple digit gains in the differed. Placements are expected to be off 6% in this afternoon's report. Cash index levels are trailing cash but remain in a positive mode.

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