Schwieterman: Cash cattle trade expected to lift on weaker dollar

Corn                                          Estimated Fund Position
Trends
Short Term: Up                      Net Long Futures and Options: 187610
Long Term: Up                      Change: +13000
Overnight Trade: Z +4 @7:30 AM

Export sales were horrible. We had net cancellations for both the old crop and new crop, so there is no doubt that high prices are slowing demand. Right now the job of the market is to slow demand and it is working. The crop is still shrinking, so we still don’t know how much demand needs to be slowed, but if we don’t have some decent export sales soon, the market will head lower.

Wheat                                     Estimated Fund Position
Trends
Short Term: Up                      Net Long Futures and Options: 22225
Long Term:Up                        Change: +6000
Overnight Trade: Chicago: Z-3 KC: Z -2 @7:30 AM

Wheat export sales were a little light at 367,000 MT. Sales will need to be larger than that for the wheat to do more than just follow the corn. The $9.50 area will remain a key resistance level for the December KW. There is a good chance we test that again today or tomorrow. The new crop July is at a big discount to the old crop and it will be interesting to see how long that last with the dry conditions in the HRW belt.

Soybeans                                Estimated Fund Position
Trends
Short Term: Up                      Net Long Futures and Options: 237424
Long Term:Up                        Change: +12000
Overnight Trade: X -7 @7:30 AM

Soybean export sales were good at 193,200 MT of old crop and 517,000 MT of new crop sales. USDA is still underestimating old crop export sales and the market needs to slow the new crop sales, because the crop is going to be short. The big advantage the soybean market has over the corn is that demand has not slowed nearly as much. Buy breaks.

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

Live cattle futures closed moderately lower on Wednesday, as the market tightened the gap between cash and front end futures. Weakness developing in the Dollar this morning could be enough to support futures into this weeks’ cash trade. The Dollar has dropped 130 points in two days, providing support for all exportable commodities. We expect cash to develop $1-$2 higher than week ago levels, as early as this morning.

Feeder Cattle
Trends
Short Term: Down
Long Term: Down
Opening Call: Mixed

Feeder cattle futures closed sharply lower on Wednesday, as the premium to cash is still too high. Until the prospects of lower corn prices or much higher fats develop, we expect feeders to struggle. Corn values have traded both sides of unchanged, but appear to Range bound after the recent windfall movement. Continue to sell rallies in the feeders until further notice.

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