Schwieterman: Feeder cattle sold off sharply with higher new corn

Corn                                            Estimated Fund Position
Trends
Short Term: Up                         Net Long Futures and Options: 31024
Long Term: Up                          Change: +21000
Overnight Trade: N -5 Z -12 @7:30 AM
Opening Calls: 5-10 Lower

The corn has seen wild swings in the early trade. Forecasts are generally hot and dry for most of the Corn Belt, which is supportive. Basis levels have been a little weaker in many areas in response to poor export sales and talk of ethanol production slowing, thus we have seen significant bear spreading this week. The December corn charts now has a definite bullish tilt and the next technical hurdle is the $5.75 resistance.

Wheat                                         Estimated Fund Position
Trends
Short Term: Up                          Net Long Futures and Options: -50602
Long Term:Up                           Change: +4000
Overnight Trade: Chicago: N -8 KC: N -9 @7:30 AM
Opening Calls: 5-10 Lower

The move through the trend line resistance and 50-day moving average is certainly significant, as is the fact that harvest is wrapping up is Kansas. Supplies of HRW won’t be larger than they are right now. Still, until we see better demand numbers, the wheat will depend on the corn for strength. As long as the weather is a threat to the corn, there will be good support under the wheat market.

Soybeans                                     Estimated Fund Position
Trends
Short Term: Up                           Net Long Futures and Options: 182059
Long Term:Up                            Change: +15000
Overnight Trade: N -6 X -11 @7:30 AM
Opening Calls: Mixed

The November beans are testing the May high, which is just below $14.00. It is interesting that we have seen a little bit of bull spreading return to the soybeans even though the weather is a threat to the new crop, and that is because we continue to see good export sales and crush, and no one is quite sure how tight old crop stocks will get. Buy breaks if we get them.

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

Live cattle futures closed moderately lower in the front three months, with deferred contracts moderately higher. Tuesday’s spread trade was a direct result of the sharp gains in corn values over the past three days. Deferred cattle are anticipating lower kill weights, due to the higher feed costs. Overnight corn values are off 3-8 cents, providing some support for the bull spreads in the cattle. Cash trade is unlikely today, unless a dramatic change in bids or asking prices occur.

Feeder Cattle
Trends
Short Term: Down
Long Term: Down
Opening Call: 10-30 Higher

Feeder cattle futures sold off sharply on Tuesday, pressured by the sharp gains in new crop corn futures. The front four months lost between 2.10 and 2.55 on the day. This mornings’ weakness in the corn should provide some support, but severe technical damage has been done. Two sided trade should be expected, with willing sellers on any significant bounce.

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