Schwieterman: Live cattle recover some losses, feeders fall

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Corn                                                    Estimated Fund Position
Short Term: Up                                 Net Long Futures and Options:
Long Term: Down                            Change:
Overnight Trade: K +5 Z +3 @7:30 AM

The corn is firm and we continue to see bull spreading, but generally speaking the market has done a poor job holding gains. Traders must balance the strong basis and difficulty securing cash supplies with the fact that USDA posted a very large increase in ending stocks in this week’s report. The information we have doesn’t really add up, which doesn’t give the bulls or the bears much confidence. My thought is that as long as the market is being bull spread the supply and demand situation is probably tighter than USDA suggests. May corn should be above to reach $6.95.

Wheat                                                 Estimated Fund Position
Short Term: Up                                  Net Long Futures and Options:
Long Term: Down                             Change:
Overnight Trade: Chicago: K +6 KC: K +5 @7:30 AM

The wheat is trying to work higher due to strength in the corn, demand from China, poor crop condition ratings, and possible freeze damage. The most important component of this is the demand, because without export demand the crop size doesn’t matter. For today the number to watch is $7.54 in the July KW. The 40-day moving average has stopped this market twice this week, so the bulls need to see a close above that level to keep the upward momentum going.

Soybeans                                            Estimated Fund Position
Short Term: Up                                  Net Long Futures and Options:
Long Term: Down                             Change:
Overnight Trade: K +7 X+2 @7:30 AM

Bull spreading was very active in the soybeans yesterday and again overnight. The May – July spread is very near a record level thanks to strong, and strengthening, basis levels. This is another case where the cash market may actually be tighter than the supply and demand numbers suggest. At this point the job of the market is to stop exports of soybeans and soybean meal. Look for the May contract to move above $14.50 soon.

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

Live cattle futures closed moderately higher on Thursday, recovering a small portion of Wednesday’s selloff. Some western cash trade was reported at $128 on Thursday, which was $1.00 under last weeks’ top range. Northern trade remains mostly untested heading into Friday, with $207 in the beef the asking price. Cutouts were lower, while hide and offal values continue set new record highs. Overnight futures have traded both sides of unchanged, with most of the session holding a firmer bias. A stronger Dollar and weaker equities could stymie strength in the live cattle.

Feeder Cattle
Short Term: Down
Long Term: Down
Opening Call: 30-50 Lower

Feeder cattle futures tried to recover with the fats but failed late in the session on Thursday, with April sliding to triple digit losses by the close. Overnight activity remains on the defensive, with current prices off .50- .85 for the session. Corn prices are firmer again, with May now up 27 cents for the week. Cash index levels have fallen right at 1.00 since last Friday. April futures, as of the overnight trade have final dropped below the current index. Taking the premium out of the deferred contracts could end up being the most healthy thing for this market over the long haul.

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