Schwieterman: Cattle trade matches previous week

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Corn                                                 Estimated Fund Position
Trends – December Contract
Short Term:Down                         Net Long Futures and Options: -30845
Long Term: Down                          Change: -25000
Overnight Trade: N -3 Z -5 @7:30 AM


There was more bull spreading in the corn overnight. The July – December spread is approaching the record set back in 1996. So far the December contract is holding above $5.00, but one has to wonder how much longer that can last. Failure of the $5.00 support would make the $4.50 area the next downside target and such a move is possible ahead of the July supply and demand report that comes out on the 11th. Crop condition ratings will be very important. If the ratings can’t get above the 5-year average there is a lot less reason for heavy selling pressure.

Wheat                                            Estimated Fund Position
Trends – December Contract
Short Term: Down                       Net Long Futures and Options: -59123
Long Term: Down                        Change: -5000
Overnight Trade: Chicago: N +2 KC: N +4 @7:30 AM


Wheat was higher overnight, but there isn’t too much reason for it. The market is clearly oversold and due for some kind of a correction, but with the December corn lower the correction will be short lived. What this market has to have are export sales that are big enough to generate enthusiasm amongst the speculators and we aren’t seeing that yet. $7.00 is now resistance in the September KW and one should now be in fear of a move to $6.50.

Soybeans                                       Estimated Fund Position
Trends – August Contract
Short Term: Up                             Net Long Futures and Options: 70054
Long Term:Up                               Change: -7000
Overnight Trade: N +35 X +4 @7:30 AM


The July soybeans traded over $16.00 overnight and nearly made a new contract high. Bull spreaders are running rampant. The November contract fell to the $12.40 objective overnight, so that market may be due for a corrective rally, but at the moment it certainly looks like rallies are for selling. The July supply and demand report will likely be bearish and that is what will be on traders minds.

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


Live cattle futures closed moderately lower on Friday, leading to continued disappointment in the cash market, when we saw cattle trade steady with the previous week. The inability of the cattle market to sustain any positive energy over recent weeks is discouraging. Weather looks great for outdoor activity over the 4th of July week and weekend. We expect meat clearance to be strong, with an exceptionally long holiday scheduled for many people. Open interest in the live pit continues to decline, suggesting a lack of new interest in this market to either side of the trade.

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


Feeder cattle futures closed modestly lower on Friday, in spite of the sharp losses in corn futures. Overnight corn prices continued to show weakness, which should provide underlying support for the feeders. Cash index levels continue to edge higher at a very slow pace. The discount of cash to the August futures remains at a very robust 13.50 level. We look for cash to strengthen but feel the current board premium may be more than sufficient unless fat cattle prices strengthen significantly.



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