Schwieterman: Cattle futures lower, grain report favors corn

Bret Crotts and Mark Green  |  Updated: 01/14/2013

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Corn                                     Estimated Fund Position
Trends
Short Term: Up                 Net Long Futures and Options: 78839
Long Term: Down             Change: +25000
Overnight Trade: H +14 @7:30 AM

The corn market is strong and the bull spreading is active this morning. The March contract has made a new high for the move by ½ a cent and is trading against the resistance at the 50-day moving average. A close above $7.25 in the March contract would look friendly in the charts. Friday’s supply and demand numbers were friendly and the low ending stocks figure will keep support under the market. If we ever do see an improvement in exports it will make end users nervous and be very supportive to prices.

Wheat                                   Estimated Fund Position
Trends
Short Term: Down             Net Long Futures and Options: -62329
Long Term: Down              Change: +9000
Overnight Trade: Chicago: H +16 KC: H +15 @7:30 AM

The March KW posted an outside day higher Friday and has seen good follow through buying overnight. Technical indicators suggest this market has the potential to reach the $8.60 - $8.80 in the next week or so. Of course it would help if we could see the export market improve, which would draw stocks down to a less comfortable level. In the meantime the job of the market will be to restrict feed usage. A resurgence in the corn market will result in more wheat feeding.

Soybeans                              Estimated Fund Position
Trends
Short Term: Down              Net Long Futures and Options: 22466
Long Term: Down               Change: -7000
Overnight Trade: H +20 @7:30 AM

The soybeans are trying to make up for Friday’s lack of strength. The report numbers were not overtly bearish, but they were negative in comparison to the corn, which resulted in a great deal of spread trade. However, demand for soybeans and the products are still quite strong and it appears to me that USDA is underestimating US export potential. The job of the market is to make sure we avoid shortages this summer and those shortages are still a threat if the current export pace is maintained. The $14.00 level will be the key this week. If the March beans can’t clear $14.00 this week, nobody will be turning bullish.

Live Cattle
Trend
Short Term: Down
Long Term: Down
Opening Calls: 20-30 Lower

Live cattle futures closed moderately to sharply lower on Friday, with February off 2.30 for the week. Cash dropped a similar amount, with the bulk of the southern trade at $126. Technical weakness and continued margin struggles at the kill level is weighing on the futures. Oversold conditions could lead to a rebound after today’s session, but overall direction remains defensive. Expectations of higher placements in December is adding pressure to the April-June timeframe.

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

Feeder cattle futures suffered another round of triple digit losses on Friday, as the grain report was favorable to the corn. Strength in corn futures continued overnight, suggesting another weak opening for feeders. Optimism that was rampant just two weeks ago is waning heavily now in the salebarns. We look for sellers to be active on any recovery effort in this complex. For the week March feeders were off 4.60 and we expect more unless the corn tops out.


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