Schwieterman: USDA underestimates corn exports

Corn                                              Estimated Fund Position
Trends
Short Term: Up                           Net Long Futures and Options: 48652
Long Term: Down                      Change: -18000
Overnight Trade: N +3/4 Z -1/2
Opening Calls: Mixed

Export sales were huge with 1.3 MMT of old crop and 2.1 MMT of new crop sales. This was only slightly above expectations, but is still a good indication that USDA is underestimating old crop exports. USDA may also be underestimating ethanol usage, which makes our real ending stocks very, very tight. The market didn’t see much recovery from yesterday’s meltdown, but at least the wheat isn’t plummeting today, which will help keep sellers on the sidelines. Major support for the July contract is below the market at $6.06 and the December contract needs to hold at yesterday’s low of $5.28 ½.

Wheat                                            Estimated Fund Position
Trends
Short Term: Down                       Net Long Futures and Options: -85566
Long Term: Down                        Change: -5000
Overnight Trade: Chicago: N +3 KC: N +1/4
Opening Calls: 1-3 Higher

The wheat tour didn’t find nearly as much good wheat yesterday as it did Tuesday, but the consensus is that the crop will be much better than last year and supplies will remain abundant. The charts look very bearish after yesterday’s break and the next downside objective for the July KW is the $5.92 area. Look for the July KW to fall below the July corn. Export sales were good again with 256,700 MT of old crop and 454,800 MT of new crop sales.

Soybeans                                           Estimated Fund Position
Trends
Short Term: Up                                 Net Long Futures and Options: 225474
Long Term: Up                                  Change: -8000
Overnight Trade: N -2 3/4 X -2
Opening Calls: 2-4 Lower

Soybean export sales were excellent at 598,000 MT of old crop and 1.1 MMT of new crop sales. USDA will have to increase the export estimate in the May supply and demand report. The reversal lower on the charts is a concern and is a good indication that we will see a deeper correction. However, with the fundamental outlook still improving, we have to look at breaks as temporary.

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

Live cattle closed moderately lower in the front three trading months on Wednesday, with fresh sellers entering the market ahead of this week’s cash trade. Asking prices of $121+ in the south and $195 in the north remain well separated from current bids. Kill pace for the week is picking, as packers look to take advantage of their best margins in some time. Margins for local spec positions will increase at the Merc on Monday the 7th, which could cause some liquidation selling. Outside markets are mixed, with equities and the Dollar higher.

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

Feeder cattle futures closed narrowly mixed on Wednesday and are expected to see similar early trade this morning. The feeders are currently trading higher across the board in spite of the softening cash index. Chart patterns and seasonal timing are supportive. Positive closeouts are needed out of the feedlots in order to see much cash improvement in the country. Numbers remain very tight.

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