Schwieterman: Cattle futures recovery hampered by rising corn

Corn                                      Estimated Fund Position
Trends
Short Term: Up                  Net Long Futures and Options: 62372
Long Term: Up                   Change: +3000
Overnight Trade: H +5 @7:30 AM

The corn market is right back to testing the top of the recent trading range. Traders bought the grain markets overnight due in part to some threatening weather in S. America. The soybeans are the upside leader and the corn is following along. Bullish traders are still hoping for fresh export sales news to propel this market higher. A close over $7.35 in the March contract will make the $7.67 level the next upside objective.

Wheat                                  Estimated Fund Position
Trends
Short Term: Up                  Net Long Futures and Options: -51304
Long Term: Down             Change: +2000
Overnight Trade: Chicago: H +3 KC: H +3 @7:30 AM

The March KW is still consolidating at the 38% retracement of the last move down. The wheat had good export sales data last week and another week would certainly boost the confidence of the bulls. Meanwhile the Drought Monitor still looks horrible, which is supportive to the new crop and rising corn prices threaten to put more wheat into the feed rations. The bulls have some decent news to work with, but any sustained gains will have to be brought about by better export sales.

Soybeans                             Estimated Fund Position
Trends
Short Term: Up                   Net Long Futures and Options: 43313
Long Term: Down              Change: -2000
Overnight Trade: H +13 @7:30 AM

The March soybean made a new high for the move overnight, although it was by less than a penny. The trading action in the soybeans over the past several months has been based on Chinese demand and the idea that there would be a huge S. American crop to keep the US from running out. Any production problem in S. America will result in more export sales for the US and very, very tight supplies this summer. Watch the forecasts closely. $15.00 is the next upside objective.

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

Live cattle futures closed sharply lower in the front two months on Friday, with deferred contracts mixed. The weakness in the February contract reached 5.40 for the week, with August off about 3.25 for the same period. Extremely oversold conditions should allow for a short covering bounce, but some heeling needs to take place before a serious recovery will likely occur. Bear spreading could remain a feature after a short covering bounce. Early show list totals for the week appear to be smaller.

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

Feeder cattle futures had a very similar week to the fats, with March feeders off 5.40 for the week and August only off 3.10. We are hearing some better than expected results from Friday’s cash sales, that suggest the front end weakness may be somewhat overdone for the time being. Corn futures are 5-6 cents higher this morning, which could weigh on any recovery effort in the feeders. Friday afternoon is the monthly on feed report. We should have estimates out by tomorrow.

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