Schwieterman: Cash index fails to keep up with cattle futures

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Corn Estimated Fund Position
Trends
Short Term:Down Net Long Futures and Options: 74301
Long Term: Down Change: -4000
Overnight Trade: H -5 @7:30 AM


As expected corn export sales were poor again at 168,900 MT for the old crop. The March contract is creeping toward the 40-day moving average, which lies at $7.14 ½ today. Tomorrow we have a supply and demand report, which is expected to show an increase in ending stocks presumably because of a lower export estimate.

Wheat Estimated Fund Position
Trends
Short Term: Down Net Long Futures and Options: -55625
Long Term: Down Change: -2000
Overnight Trade: Chicago: H -2 KC: H -2 @7:30 AM


The wheat finally found some support yesterday and ended the day with a positive close. Talk of US wheat exports to Russia and the realization that the upcoming rain event probably won’t help the HRW crop much were supportive. The market is oversold and due for a corrective bounce, but unfortunately the export sales report was poor again at 290,800 MT of old crop sales, so that won’t provide much of a catalyst for short covering.

Soybeans Estimated Fund Position
Trends
Short Term: Up Net Long Futures and Options: 79776
Long Term:Up Change: -4000
Overnight Trade: H -2@7:30 AM


Soybean export sales were huge at 896,200 MT of old crop and 771,000 MT of new crop sales. Meal and oil sales were good as well. Export sales at this pace are unsustainable and USDA should increase the export estimate in tomorrow’s report. The March contract is still struggling with the resistance at the $14.95 - $15.00 level, but there is a good chance of a breakout today or tomorrow. Buy breaks.

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


Live cattle futures closed moderately to sharply lower on Wednesday, with fresh hedge pressure on the April thru August contracts noted. Open interest went up 2,661 contracts on the selloff. Look for more of a mixed trade this morning, as the cash trade gets one day closer to a reality. Asking prices remain $127-$128, with bids no better than $123 in most regions. We expect bull spreading of the February vs deferred contracts to continue, with no deliveries tendered against the lead contract.

Feeder Cattle
Trends
Short Term: Down
Long Term: Down
Opening Call: 20-40 Lower


Feeder cattle futures posted triple digit losses on Wednesday, as cash index levels have failed to keep up with enthusiastic futures contracts. Short term indicators have turned down in the March contract, providing additional incentive for hedgers to protect inventories. Overnight corn prices drifted below key moving average support, which may provide some support for the feeders.



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