Schwieterman: Cattle futures expected to continue higher

Corn                                            Estimated Fund Position
Trends
Short Term: Up                         Net Long Futures and Options: 121343
Long Term: Up                          Change: +3000
Overnight Trade: N +1 3/4 Z +1 1/2
Opening Calls: 1-3 Higher

The corn market was quiet overnight following yesterday’s positive close. Export sales were very good at 959,100 MT. Sales like this will keep the Gulf basis firm and the May contract building a premium over the July. It looks like we are in for a day of two sided consolidation trade.

Wheat                                       Estimated Fund Position
Trends
Short Term: Up                       Net Long Futures and Options: -86986
Long Term: Down                  Change: +1000
Overnight Trade: Chicago: N +3 3/4 KC: N +2 3/4
Opening Calls: 2-4 Higher

Wheat export sales were good at 452,100 MT of old crop and 90,400 MT of new crop sales. The market is oversold and due for a corrective bounce. If the corn can post gains today, it should be a decent day for the wheat. However, one must view rallies in the wheat market as a selling opportunity.

Soybeans                                Estimated Fund Position
Trends
Short Term: Up                      Net Long Futures and Options: 202437
Long Term: Up                       Change: -4000
Overnight Trade: N +6 1/4 X +9
Opening Calls: 7-10 Higher

Soybean export sales were good at 460,100 MT of old crop and 176,300 MT of new crop sales. There were also daily sales reported to both China and unknown destinations. USDA is still underestimating exports and we will see them slowly revise the estimate higher for the next several months. $14.70 is still the next upside target for the July contract.

Live Cattle
Trend
Short Term: Down
Long Term: Down
Opening Calls: Sharply Higher

Live cattle futures closed sharply higher on Wednesday and are expected to trade sharply higher on today’s open. Cash trade developed steady to a dollar higher on Wednesday afternoon, surprising many in the trade and quickly adding new buyers into the market. Short covering along with fresh business added 1,310 contracts in open interest on the day. Overnight saw additional active buying, with April leading the surge higher, gaining as much as 1.85 as we write. The unexpected vigor of the recovery is catching traders by surprise.

Feeder Cattle
Trends
Short Term: Down
Long Term: Down
Opening Call: Sharply Higher

Feeder cattle futures joined the fats, with triple digit gains on Wednesday and further gains in overnight trade. Many of the feeder contracts have gained a full 3.00 since the close of business on Tuesday. Stable to firmer trade in the corn is doing nothing to slow gains in the feeders. The complex has returned to a sizable premium over the cash index in all deferred contracts. The bottoming process we had been waiting to see appears to be underway.

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