Schwieterman: Feeder cattle futures up as corn values decline

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Corn                               Estimated Fund Position
Trends – December Contract
Short Term:Down           Net Long Futures and Options: -144420
Long Term: Down           Change: -4000
Overnight Trade: Z -1 @7:30 AM


The overnight session has been quiet and the market is in consolidation mode. Crop condition ratings dropped by 2 points to 54% Good to Excellent, which was in line with expectations and therefore not market moving data. Yield data seems to be “better than expected,” which will keep a lid on rally attempts, but basically we are just waiting for Thursday’s data. Plan on two sided trade today.

Wheat                            Estimated Fund Position
Trends – December Contract
Short Term: Down         Net Long Futures and Options: -78491
Long Term: Down          Change: -2000
Overnight Trade: Chicago: Z +1/4 KC: Z +1/4 @7:30 AM


The December KW is trading at the recent lows waiting to see what the corn market does. The market is oversold and due for a corrective bounce back to the $7.00 - $7.10 area, but it all depends on Thursday’s data. US wheat numbers have a chance to be friendly, but it is the reaction to the corn and soybean numbers that will be the driving force Thursday and Friday.

Soybeans                      Estimated Fund Position
Trends – November Contract
Short Term: Up             Net Long Futures and Options: 115340
Long Term:Up               Change: -6000
Overnight Trade: X -10 @7:30 AM


November soybeans reversed lower yesterday and saw further weakness overnight. Crop condition ratings didn’t decline quite as much as expected dropping 2 points to 52% Good to Excellent. A pull back to the $13.15 level in the November contract is possible ahead of the report, and then it is all up to the USDA. The market will obviously be very sensitive to the yield estimate that they throw out. Anything below 41 bu/ac should send the market sharply higher.

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


Live cattle futures closed moderately lower in the front two months, with deferred contracts near steady. Weaker cutout values to start the week, along with technical weakness could keep the lid on rally attempts over the near term. Our show list showed a decline of about 8% from week ago levels, while northern lists remained steady to higher. Decembers close below the 40 day moving average will bring sellers in on rallies. Overnight trade has been softer but should receive support from a continued rally in the equity markets.

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


Feeder cattle futures closed modestly higher on Monday, with most of their support stemming from lower corn values. Cash index levels posted new 19 month highs on Monday at 156.90. We look for feeders to struggle from current levels unless corn moves to new lows coming out of Thursday’s crop report. Overnight prices are trending lower even though corn prices are modestly lower as well.



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