Schwieterman: High slaughter rate may keep cash cattle moving

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Corn                                               Estimated Fund Position
Trends
Short Term: Down                       Net Long Futures and Options: 36619
Long Term: Down                        Change: -15000
Overnight Trade: N -1/4 Z Unch @7:15 AM
Opening Calls: Mixed


Crop condition ratings declined 5 points to 72% Good to Excellent and Illinois, Indiana, and Kansas all had double digit declines. The decline in ratings was expected, so it didn’t provide much support to the market. On the charts, the July contract fell through critical support and although the market is oversold there is currently no indication of a bottom. As for the December contract, bear spreading and imperfect weather in the Corn Belt are keeping that market from taking out the May low. A record yield is looking less likely all the time.

Wheat                                             Estimated Fund Position
Trends
Short Term: Down                        Net Long Futures and Options: -42207
Long Term:Up                                Change: -7000
Overnight Trade: Chicago: N -7 1/2 KC: N -8 1/4 @7:15 AM
Opening Calls: 5-10 Lower


The $6.85 support failed in the July KW, which makes $6.55 the next downside objective. Harvest pressure, and corn pressure, are the main forces in the market right now. Production is not going to meet expectations, which is supportive, but as usual, what this market really needs to see is demand. After the recent short liquidation the funds now have a lot of room to sell wheat in Chicago.

Soybeans                                        Estimated Fund Position
Trends
Short Term: Down                         Net Long Futures and Options: 179476
Long Term: Down                           Change: +4000
Overnight Trade: N -10 1/4 X -2 1/4 @7:15 AM
Opening Calls: 7-10 Lower


Bear spreading has been active overnight due at least in part to concerns about the weather and the slowdown in Chinese old crop purchases. On the charts, the beans are still trading in a downward channel. The bulls will at least need to take out yesterday’s high at some point this week in order to change the trend. Rainfall totals over the next 3-4 days will determine if that happens.

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


Live cattle futures closed moderately higher to start the short week, with higher cutouts and firm equities leading the way. Overnight saw moderate weakness, with the Dollar firming and equities sliding lower. A lack of interest from the large speculative trade is keeping a lid on price and the open interest in a declining mode. Cash interest could be a day or two away, but if slaughter keeps up Tuesday’s 130,000 pace, we will see buyers sooner than later.

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

Feeder cattle futures closed moderately to sharply lower on Tuesday, as traders sold the large premium to cash in the late summer and fall contracts. Weaker corn values didn’t even faze the selloff in the feeders. We expect to see more of the same, unless deferred live cattle are able to find buying interest. Overnight feeders are mixed to lower, with corn trading narrowly on either side of unchanged.



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