Schwieterman: Cattle futures higher Tuesday, corn stronger

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Corn                                      Estimated Fund Position
Trends
Short Term: Up                  Net Long Futures and Options: 18527
Long Term: Up                   Change: +10000
Overnight Trade: N +1 Z +4 @7:30 AM


We continue to see bear spreading in the corn market thanks to wet weather in parts of the corn belt and planting delay fears. 86% of the crop has been planted, which was at the low end of the range of guesses and it is a little behind average. On the charts, the July contract is struggling with the $6.69 area again, but it looks like we should finally move through that resistance level this week. Basis levels aren’t backing off, which leaves plenty of upside potential for the corn if it decides to catch up with the cash market.

Wheat                                   Estimated Fund Position
Trends
Short Term: Down              Net Long Futures and Options: -64732
Long Term: Down               Change: -1500
Overnight Trade: Chicago: N -2 KC: N +1 @7:30 AM


The July KW is struggling to trade through trend line resistance. The strength in the December corn has failed to support the wheat market, which is an ominous sign. The crop is not getting any better, but supply concerns aren’t troubling traders. In Kansas the Good to Excellent ratings were unchanged at 28%, but the Poor to Very Poor increased by 3 points to 45%. Critical support comes in at $7.30 today and there are multiple resistance levels from $7.47 to $7.59.

Soybeans                              Estimated Fund Position
Trends
Short Term: Up                    Net Long Futures and Options: 71957
Long Term:Up                      Change: +10000
Overnight Trade: N +1 X -1 @7:30 AM


Soybeans surged higher yesterday, but saw no follow through strength overnight. Planting progress was at the low end of expectations at 44%, which could be supportive, but traders are more concerned with the prospect of increased acreage. Basis levels are still slipping, which will make it hard for the July contract to rally from this level. Plan on corrective activity for the time being.

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


Live cattle futures closed moderately higher on Tuesday, with deferred contracts leading the early week recovery. Overnight activity has been narrowly mixed, with an upward bias. Show lists are larger this week, while we expect that cattle remain fairly green in many instances. Bids and asking prices have started the week a good $4.00 apart, with both sides $2-$3 separated from last weeks’ cash trade. Short term indicators are turning up in the June contract, with the 40 day moving average looming as the first key resistance level.

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


Feeder cattle futures closed as much as .92 higher on Tuesday, in spite of the sharply higher close in the corn futures. Feeders are trading mostly softer in overnight trade, with additional strength in new crop corn a limiting factor. Long term numbers look to remain tight, as ongoing drought conditions in the western half of the country has caused further herd liquidation over the past several months. A second consecutive close above the 5.50 level in December corn will likely keep a lid on potential efforts in the feeders.



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