Schwieterman: Cash cattle trade at a stalled, corn market lower

Corn                                        Estimated Fund Position
Trends
Short Term: Up                    Net Long Futures and Options: -2382
Long Term: Down               Change: -15000
Overnight Trade: N -4 Z -4 3/4 @7:15 AM
Opening Calls: 3-5 Lower

Traders continue to bull spread the corn market based on firming basis levels and wetter forecasts for the NW Corn Belt. The December contract is back below the 50-day moving average, which gives the chart a negative tilt and it will take a drier forecast to get the market to move back up. Crop condition ratings will still decline in KS, MO, IL, IN, and OH, so USDA’s 166 yield is still unlikely regardless of how much it rains in MN.

Wheat                                     Estimated Fund Position
Trends
Short Term: Up                     Net Long Futures and Options: -51671
Long Term:Up                       Change: -3000
Overnight Trade: Chicago: N +3 3/4 KC: N +5 1/2 @7:15 AM
Opening Calls: 3-5 Higher

The July KW continues to hold just above the $6.35 level. The support will be tested again today and if it fails, the $6.09 area is the next downside target. The overnight pop in the market suggests it will hold again today, but this market can’t stand to see more pressure in the corn today and could really use some positive demand news.

Soybeans                              Estimated Fund Position
Trends
Short Term: Up                    Net Long Futures and Options: 160838
Long Term:Up                      Change: +6000
Overnight Trade: N -2 3/4 X -5 1/4 @7:15 AM
Opening Calls: 3-5 Lower

The soybeans posted decent gains yesterday, but have had no follow through buying thus far. Pressure in the corn and uncertainty about the weather is discouraging buyers. The charts still look friendly, although indicators are getting overbought. I little bit more fresh demand news and lower crop condition ratings on Monday will help send this market back to the contract highs.

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

Live cattle futures finished steady to modestly lower on Tuesday, as traders tried to decipher monthly supply demand numbers for grain and meat. The beef production for the year was lowered 102 million lbs.. Lower corn prices could pressure deferred live cattle, as traders anticipate longer days on feed with lower corn. Cash trade remains at a standstill, with bids and asking prices a good $3-$4 apart. We still see two sided trade, with a stronger bias.

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

Feeder cattle futures posted strong gains on Tuesday, supported by lower corn trade and firming cash. Overnight has seen much of the same, with corn softer and feeders edging higher. The move toward contract highs in the feeders is being fueled by ideas that the numbers simply will not be there come Fall. We expect that higher live cattle futures will be needed to push feeders through their next resistance levels.

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