Schwieterman: Live cattle futures end week with a selloff

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Corn                                        Estimated Fund Position
Trends
Short Term: Up                     Net Long Futures and Options: -10277
Long Term: Down                Change: -2000
Overnight Trade: N -17 Z -18 @7:30 AM


Corn gapped lower and was under heavy selling pressure overnight due to improved planting prospects. We have to be aware that forecasts can flip flop and create a great deal of volatility, but if conditions due improve, and planting gets back on track, this is probably just the beginning of the pressure in the new crop contracts. We do have a supply and demand report Friday that can provide market moving information, especially in terms of acreage and yield, but if traders think the crop is in good shape, the trend will be down.

Wheat                                     Estimated Fund Position
Trends
Short Term: Up                      Net Long Futures and Options: -41393
Long Term:Up                        Change: -2000
Overnight Trade: Chicago: N -12 KC: N -11 @7:30 AM


The wheat followed the corn lower overnight. There are some chances for moisture in the HRW Belt this week, but the chances aren’t great where the need is the greatest. Expect to see crop condition ratings fall a little bit more in this afternoon’s report. Conditions ratings are already so low that it is hard to get much worse, so don’t look for big changes. The July KW will likely test support at the $7.52 - $7.56 level today or tomorrow.

Soybeans                                 Estimated Fund Position
Trends
Short Term: Up                       Net Long Futures and Options: 52171
Long Term: Down                  Change: +5000
Overnight Trade: N -4 X -9 @7:30 AM

Soybeans fared better than the corn and wheat, which must be due to spread trade and hopes  that there won’t be as big of a shift in acreage as feared. The soybeans saw days of heavy pressure last week, so today action is basically just letting the other markets play catch up. Bull spreading was active and that should be the trend of the market for the long term. The November contract will struggle if the weather is good regardless of the acreage.

Live Cattle
Trend
Short Term: Up
Long Term: Up
Opening Calls: 20-30 Higher


Live cattle futures imploded on Friday, closing below the 40 day moving average in most all of the contracts. The end of the week selloff came in the face of sharply higher cutout values for the week and better cash trade in all regions. Open interest was actually up 765 contracts on the break, suggesting new sellers entering the market. The $7-$9 discount to cash in the June contract suggests that something is going to have to give to close the gap. Still feels like cash will make the biggest concession over the near term.

Feeder Cattle
Trends
Short Term: Up
Long Term: Down
Opening Call: 20-40 Higher


Feeder cattle futures closed sharply lower on Friday, with several months off more than 2.00 for the session. The premiums to cash along with ideas circulating that April placements may have been up 15-20% over a year ago brought the sellers into play. Maybe the biggest factor was the inability of the fats to hold onto technical strength for more than a couple of days. Overnight corn prices could be just the boost feeders need, with old and new crop more than .15 lower.



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