Schwieterman: Stronger corn takes feeder cattle lower

Corn                                               Estimated Fund Position
Trends
Short Term: Up                            Net Long Futures and Options: 177167
Long Term: Up                             Change: +8000
Overnight Trade: N +1 3/4 Z -2
Opening Calls: Mixed

Bull spreaders were active again overnight with the May stronger than the July and the July stronger than December. Basis levels are generally improving around the country, which tells us that despite the recent strength, old crop futures are still not moving higher fast enough to keep up with the cash market. Plan on the bull spreads to continue to work and look for the May and July futures to be at $6.75 soon.

Wheat                                              Estimated Fund Position
Trends
Short Term: Up                               Net Long Futures and Options: -75603
Long Term: Down                          Change: +1500
Overnight Trade: Chicago: N -8 1/2 KC: N -8
Opening Calls: 5-8 Lower

The wheat market is still the weak link. When you look at the fact that May KW is only about 21 cents over the May corn and December KW is about $1.83 over the December corn, you see that there could be a huge spread trade opportunity if we have a big wheat crop and if there is anything that calls into question this year’s big corn production estimates. In the meantime, plan on the wheat remaining weak and look for a test of the recent lows.

Soybeans                                         Estimated Fund Position
Trends
Short Term: Up                                Net Long Futures and Options: 194708
Long Term: Up                                 Change: -4000
Overnight Trade: N -4 3/4 X -5 1/2
Opening Calls: 5-7 Lower

The July soybeans did not make a new high for the move yesterday, had a poor close, and were weaker again overnight. Technical indicators suggest this market is ripe for a correction,  but we still have to maintain the attitude that breaks are a buying opportunity. Next week’s supply and demand report should be friendly and this market is headed to $14.70.

Live Cattle
Trend
Short Term: Down
Long Term: Down
Opening Calls: Mixed

Live cattle futures continued their decline on Tuesday, posting new lows for the move out through the October contract. Cutout values were sharply lower and a few thousand head of cash sales were made in the south at the $122 level. The lower early week business will make it difficult for feedlots to sustain asking prices of $125 and $203 in the central and northern regions. Overnight activity has traded moderately lower for the most part, getting pressure from weaker equities and a stronger Dollar.

Feeder Cattle
Trends
Short Term: Down
Long Term: Down
Opening Call: 10-20 Higher

Feeder cattle futures closed sharply lower on Tuesday, with triple digit losses posted in several contracts. Feeders did hold above the lows for the move posted on Monday. Continued strength in old crop corn, along with declining deferred live cattle are weighing on feeders. Overnight activity has been mixed, with a slightly weaker bias. Cash index levels remain well above current futures pricing.

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