Schwieterman: Feeder cattle stronger as corn prices dip

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Corn                                          Estimated Fund Position
Trends
Short Term: Up                      Net Long Futures and Options: 57372
Long Term: Up                       Change: -7000
Overnight Trade: H -5 @7:30 AM


Yesterday the March corn fell out of the sideways pattern and continued lower overnight. $7.12 is now the downside objective followed by $7.00. There is fear of another poor ethanol production figure today and the forecasts in Argentina are less threatening, which are the main factors pressuring the market. Export sales are delayed until tomorrow due to the holiday, so the ethanol production figure will be the major fundamental input of the day.

Wheat                                       Estimated Fund Position
Trends
Short Term: Up                       Net Long Futures and Options: -57304
Long Term: Down                  Change: -2000
Overnight Trade: Chicago: H -7 KC: H -7 @7:30 AM


The March KW is headed to $8.11. Talk about moisture in the forecast for the HRW Belt has helped to pressure the market, but if we are pinning the hopes of the wheat crop on this moisture event, I think there is going to be a lot of disappointment. So if we are really seeing pressure in the market due to the forecasts then it is likely that we see a significant rebound next week.

Soybeans                                   Estimated Fund Position
Trends
Short Term: Up                         Net Long Futures and Options: 45313
Long Term: Down                    Change: -5000
Overnight Trade: H -16 @7:30 AM


Traders seem convinced that the weather will improve in S. America. The 38% retracement support has failed in the March contract, which makes the 62% retracement at $13.93 the next downside objective. Another big export sales number in tomorrow’s report may turn the market around sooner, but for the moment it looks like the bears are in control.

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


Live cattle futures closed narrowly mixed on Wednesday and are trending the same way in overnight trade. Some cash trade developed on Wednesday afternoon, with some feedlots across the region accepting $122 bids. More than half of the available cattle remain priced near last weeks’ highs of $125. Tighter supplies remain just around the corner and the ability of the futures market to hold against the lower cash was impressive. Open interest rose more than 6,300 on the day. We continue to see feedlot numbers off 5% or more into the 3rd quarter.

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


Feeder cattle closed mostly stronger on Wednesday, with the exception of the expiring January contract. Lower corn prices on Wednesday and again overnight continue to support the feeders. Look for mixed overnight trade to firm as we get closer to Friday’s on feed report. Estimates of 95% on feed, 104% placed and 93% marketed could see some surprises.



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