Schwieterman: Cattle futures higher, profit taking limits gains

Corn                                         Estimated Fund Position
Trends
Short Term: Up                      Net Long Futures and Options: 177610
Long Term: Up                       Change: -10000
Overnight Trade: Z +7 @7:30 AM

The weather remains threatening, crop condition ratings are still declining, yield estimates from recent crop tours are disappointing, but corn is still lower for the week. The December corn has been sideways for about two weeks because the bullish supply fundamentals are being offset by the bearish demand fundamentals. The bulls will need to see a new high very soon to regain the bullish momentum the market once had, otherwise we have to look for a deeper correction to regenerate some demand. Right now all signs point to sideways trade.

Wheat                                        Estimated Fund Position
Trends
Short Term: Up                        Net Long Futures and Options: 17225
Long Term:Up                          Change: -5000
Overnight Trade: Chicago: Z+13 KC: Z +12 @7:30 AM

Eventually the weather problems in Europe could lead to much better export demand for US wheat, which would in turn make the wheat market explosive, but for the moment wheat is still waiting on the corn for direction. The contract to watch may be the July 13 KW. That contract could respond well to both improved demand and the lack of moisture in the HRW Belt.

Soybeans                                  Estimated Fund Position
Trends
Short Term: Up                        Net Long Futures and Options: 225424
Long Term:Up                           Change: -12000
Overnight Trade: X +18 @7:30 AM

The soybeans have made big price swings this week and there is no reason not to expect more of the same today. The soybeans have a better demand outlook than the corn and just as much potential for production loss, which gives the soybean complex huge upside potential. A move back to $16.20 in the November contract is likely very soon. Buy breaks.

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

Live cattle future closed moderately higher on Thursday, with settlement above the 50 day moving average in the October contract. Some light cash trade developed in the afternoon, with $114 traded in the south and as high as $181 in the beef up north. Outside market influences should add support this morning, with equities higher and the Dollar making new lows for the last three weeks. End of week profit taking on the cattle could limit gains. Packers will likely buy more cattle today. Will it take better money to secure more inventory is the question.

Feeder Cattle
Trends
Short Term: Down
Long Term: Down
Opening Call: 30-60 Lower

Feeder cattle futures closed sharply higher on Thursday, after posting new contract lows in the October contract. Firming corn prices in overnight trade have feeders giving back nearly half of Thursday’s gains. We continue to expect feeders to lose ground to fats, as the market continues to determine how high grain prices will climb to curb demand. Feeders are trading near last Friday’s close as we write.

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