Schwieterman: Cattle futures drop Thursday, cash trade untested

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Corn                                       Estimated Fund Position
Trends
Short Term: Up                    Net Long Futures and Options: 21527
Long Term: Up                     Change: -7000
Overnight Trade: N +2 Z -1 @7:30 AM


There was a tiny bit of bull spreading overnight thanks to the fact that the basis levels aren’t backing off and the spreads are due for a correction. Export sales were poor for the old crop at 85,700 MT, but good for the new crop at 789,600 MT. For importers the new crop obviously looks like a bargain. On the charts the July corn still hasn’t been able to push through $6.69 and the 50-day moving average is acting as support, which comes in at the $6.49 area today. Overhead resistance the December comes in at $5.68. Mid-day forecasts will likely determine the direction of the close in the new crop.

Wheat                                    Estimated Fund Position
Trends
Short Term: Down               Net Long Futures and Options: -63732
Long Term: Down                Change: -2000
Overnight Trade: Chicago: N -4 KC: N -4 @7:30 AM


So far the July KW has its 5th consecutive lower high. Export sales are supportive with 35,900 MT of old crop and 728,300 MT of new crop sales. Technical indicators suggest this market is headed lower. Harvest may be poor in a big part of the HRW Belt, but it is still hard to rally a market during harvest. $7.30 is key support.

Soybeans                               Estimated Fund Position
Trends
Short Term: Up                     Net Long Futures and Options: 65457
Long Term:Up                       Change: -2500
Overnight Trade: N +14 X +9 @7:30 AM


July soybeans are in consolidation mode. Basis levels are trying to recover from recent losses, but the net cancellations of old crop exports won’t help matters. Sales came in at negative 108,000 MT for the old crop, but 756,000 MT for the new crop. Like the corn, the new crop looks like a bargain at this point. Look for more sideways trade between $15.25 and $14.85 in the July and look for stiff overhead resistance in the November at the $13.00 level. The threat of growing acreage should begin to weigh on the new crop beans.

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


Live cattle futures closed sharply lower on Thursday, failing just above the 50 day moving average in the June contract. Cash trade remains mostly untested, with feedlots unwilling to give in to the board sell off and lower packer offers. Packers will have June contracts available to start the week but should be close enough to the knife to be more aggressive today, if feedlots hold pat. Overnight trade in the June is slightly higher, with June futures trading basically flat with last Friday’s closing prices. Basis shouldn’t get any wider heading into June.

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


Feeder cattle futures posted triple digit losses on Thursday, in spite of lower trade in the corn pit. It seems that when fats catch a cold, feeders get the flu. The feeder struggles haven’t shown much rebound effort in overnight trade, with most months trading modestly lower. The market appears to be range bound in a fairly narrow 3.00-4.00 window. Feeders will rely on the strength in the fat market if they expect to take out recent resistance levels.



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