Schwieterman: Feeder cattle futures pressured lower

Corn                                             Estimated Fund Position
Trends
Short Term:Down                    Net Long Futures and Options: 63919
Long Term: Down                    Change: -9000
Overnight Trade: H -6 @7:30 AM

The March corn made yet another new low for the move overnight, making $6.78 the next downside target. Basis levels are still strong, but there doesn’t seem to be much interest in buying futures. The main problem with the market is that there is fear of a big jump in ending stocks next year, which could very well happen if the weather this summer cooperates. In the meantime, exports and ethanol production are slow, which keeps tight old crop supplies off of traders minds.

Wheat                                          Estimated Fund Position
Trends
Short Term: Down                     Net Long Futures and Options: -68653
Long Term: Down                      Change: -3000
Overnight Trade: Chicago: H -8 KC: H -7 @7:30 AM

The March KW also made a new low for the move overnight. Some of the recent pressure has been attributed to recent moisture and moisture in the forecast, but I think a lot of areas got missed, so I wouldn’t put mush faith in the recent weather making a wheat crop. However, the failure at the January low looks very ominous for the wheat market. If there is no strength in the corn and no sign of big export sales, then there is very little hope for the wheat market, regardless of weather.

Soybeans                                    Estimated Fund Position
Trends
Short Term: Down                    Net Long Futures and Options: 68393
Long Term: Down                    Change: -5000
Overnight Trade: H -9 @7:30 AM

Overnight the March soybeans reached the 62% retracement of the last move higher, so cross your fingers that maybe a low is in. With the momentum of the grain markets clearly lower right now, my confidence is not too high. Demand is obviously strong, but the Chinese are on vacation and we still have the talk about moisture in Argentina, so the market is lacking fresh bullish news and a trigger for a short covering bounce. Be patient trying to pick a bottom. I’d at least wait for a positive close.

Live Cattle
Trend
Short Term: Down
Long Term: Down
Opening Calls: 20-30 Lower

Live cattle futures closed moderately lower on Tuesday, after posting new lows for the move in early trade. April closed 1.70 off of session lows as new buying surfaced after more than a 2.00 decline in the first half of the days’ trade. Overnight activity continued soft, with April backing off another 30 ticks by morning. Some light cash trade developed by midday on Tuesday, with most regions seeing a few cattle move $2.00 lower at $123. Open interest went up 777 contracts for the day in spite of rumors of a major fund liquidating ag positions.

Feeder Cattle
Trends
Short Term: Down
Long Term: Down
Opening Call: 40-60 Lower

Feeder cattle futures traded to limit lower levels by midsession on Tuesday, before recovering more than half of the move. Pressure in the feeders resumed in overnight trade, with the front 4 months off 50-80 points. The new lows in the feeders come with corn dropping another 20 cents since Friday’s settlement. Open interest on the day raised an impressive 1,643 contracts, suggesting new sellers entering the market.

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