Schwieterman: Feeder cattle futures up, corn sees sharp decline

Corn                                               Estimated Fund Position
Trends
Short Term:Down                       Net Long Futures and Options: 41130
Long Term: Down                       Change: -15000
Overnight Trade: N +8 3/4 Z +7 @7:15 AM
Opening Calls: 7-10 Higher

Corn prices made a decent recovery overnight, particularly the December contract which basically got back yesterday’s losses. Weather is still a concern and crop conditions will likely decline significantly in Tuesday report. Basis levels are still dropping and coupled with yesterday’s poor export sales, it is a real drag on the old crop market. Look for short covering ahead of the three day weekend. A dry extended forecast Monday night would be bullish.

Wheat                                          Estimated Fund Position
Trends
Short Term: Up                          Net Long Futures and Options: -66203
Long Term:Up                            Change: -1000
Overnight Trade: Chicago: N +12 3/4 KC: N +9 1/4 @7:15 AM
Opening Calls: 10-15 Higher

The July KW continues to hold just above the 38% retracement of the last move up. The disappointing yields in Kansas may keep this market from falling much further as long as the old crop corn can avoid a deeper selloff. I will remain cautiously optimistic about the wheat market as long as we stay above $6.85.

Soybeans                                    Estimated Fund Position
Trends
Short Term: Down                    Net Long Futures and Options: 181671
Long Term: Down                     Change: +6000
Overnight Trade: N +3 X +3 1/2 @7:15 AM
Opening Calls: 2-4 Higher

The soybeans were quiet overnight. Yesterday’s gains were good, but the mid-range close really wasn’t good enough to confirm a bottom in the market. Demand numbers are exceeding USDA’s expectations despite the talk of cancelled purchases. Plan on short covering and a little bear spreading today. The weekend’s weather won’t be good for the soybeans.

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

Live cattle futures closed modestly to moderately higher on Thursday, with northern cash trade settling in at $194 in the beef. That trade was slightly below week ago levels, but higher than the regional trade on Wednesday. Futures are trading modestly higher this morning, as trade tries to line up ahead of the three day weekend. Open interest was up on the rally, in spite of some hedge lifting in the June. If overnight weakness in the Dollar can be sustained, we could see more bounce into the weekend. A stronger Dollar will weigh on live prices.

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

Feeder cattle futures saw moderate gains across the board on Thursday, supported by a sharp decline in corn futures. Cash index levels continue to gain for the week, resting above the 196.00 level. Overnight corn prices are recovering about a third of their losses from the previous day. Feeders are narrowly mixed on either side of unchanged. Look for thin traded markets heading into the long weekend, which could produce volatility.

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