Schwieterman: Feeder cattle futures reject weakness, close higher

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Corn                                         Estimated Fund Position
Trends – March Contract
Short Term: Up                        Net Long Futures and Options: -109067
Long Term: Up                         Change: +2000
Overnight Trade: H -1 @7:30 AM


The March corn made a run at, but failed to reach, the $4.50 resistance. The market is overbought and is running out of upward momentum. The news is mostly supportive with the large export sales yesterday and some concern about the weather is Brazil. Yesterday’s cancellation of corn by the Chinese is bothersome, but we have been dealing with that for weeks thanks to our GMO problems. There is good support below the market at $4.39 and $4.35. One probably shouldn’t expect any large  movement ahead of Monday’s report, so plan on two sided trade today.

Wheat                                         Estimated Fund Position
Trends – March Contract
Short Term: Up                           Net Long Futures and Options: -90005
Long Term: Down                       Change: -3000
Overnight Trade: Chicago: H +2 KC: H +2 @7:30 AM


The March KW was higher overnight, which made up for yesterday’s late break. I’m still holding out some hope for a move up to $6.75 in the March KW since there are still a large number of short positions the funds could cover. I don’t expect to see many changes in the US wheat balance sheet, but I am still looking for a cut in Argentine production. Look for strength today as shorts bail out going into the weekend.

Soybeans                                    Estimated Fund Position
Trends – March Contract
Short Term: Up                           Net Long Futures and Options: 124105
Long Term:Up                             Change: +2000
Overnight Trade: H -1 @7:30 AM


The soybean bulls need to see a close above $13.30. Today, however, looks like it will be more of a consolidation session as traders wait for Monday’s report. It will be very interesting to see how much USDA increases the export estimate. My guess is that it won’t be very big and that they are still planning on cancellations. Plan on two sided trade today.

Live Cattle
Trend
Short Term: Down
Long Term: Up
Opening Calls: 10-30 Higher


Live cattle futures closed narrowly mixed on Thursday, with the front two months modestly lower and deferred contracts posting modest gains. Today is option expiration for the February contract and cash day for most of the feedlot industry. Bids of $140 in the south vs asking prices of $145+ should make for an interesting end to the week. Overnight trade is firmer in all but the Feb contract, which is currently steady. Cutout values were off another $3-$4 on Thursday, pulling back to levels some thought we’d never get up to just two months ago. Poor conversion conditions look to be the norm for the near future.

Feeder Cattle
Trends
Short Term: Down
Long Term: Up
Opening Call: 10-30 Higher


Feeder cattle managed to reject early weakness to close higher on Thursday. The early sell off got into some of our near term technical objectives. Depending on how corn reacts to Monday’s supply demand report, we could see a recovery effort in the feeders. January placements are almost certain to be higher than year ago levels, but the current pace in February is falling off significantly from that pace.



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