Schwieterman: Cattle futures temporarily bearish

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Corn                                    Estimated Fund Position
Trends – March Contract
Short Term:Down                Net Long Futures and Options: -203411
Long Term: Down                Change: +1000
Overnight Trade: H -1 @7:30 AM


The corn market managed to shrug off the news about China rejecting more of our corn by the end of yesterday’s session and finished the day at the top of the range. However, there wasn’t much buying interest overnight at the March corn stalled out at $4.27, which was Friday’s high. $4.27 will now act as strong resistance today and that is the level the market must move through in order to generate any short covering momentum. Fresh news is sparse. The next thing on tap is tomorrow’s ethanol production figure. Plan on sideways trade today.

Wheat                                  Estimated Fund Position
Trends – March Contract
Short Term: Up                    Net Long Futures and Options: -99925
Long Term: Down                Change: -4000
Overnight Trade: Chicago: H +1 KC: H +1 @7:30 AM


The March KW reversed lower yesterday, which was very disappointing considering the promising start to the day and the multi-month highs in the Paris Milling Wheat. It won’t be surprising to see some follow through weakness at some point today, but heavy selling pressure isn’t likely. A move to $7.30 still looks possible for the March KW because we are still dealing with very tight stocks and every time we have a good export sales week the supplies get tighter.

Soybeans                             Estimated Fund Position
Trends – January Contract
Short Term: Up                     Net Long Futures and Options: 101167
Long Term:Up                       Change: -7000
Overnight Trade: F -8 @7:30 AM


Like the wheat, the soybeans reversed lower yesterday. After several days of not caring about S. America, those fears came back with a vengeance, which was exacerbated by ideas that the Chinese may slow their import program in the future due to changes in their subsidy programs. Time will tell what the true impact of this is, but in the mean time we have an ugly looking chart that suggests a move back to $12.85 is in the works for the January contract.

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


Live cattle futures closed narrowly mixed on Monday, with weakness in the December contract. We expect to see more short term bear spreading as we head toward first notice day for deliveries against the Dec contract. Option expiration on Friday could also be a factor into weeks’ end. Open interest climbed a solid 2,534 contracts on Monday in spite of the narrow trading range. Show lists appear to be smaller in most locations, which should continue to add support.

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


Feeder cattle futures settled narrowly mixed on Monday, with light bear spreading a feature. Overnight trade is modestly higher across the board, with corn prices showing some modest weakness. Cash index levels jumped 1.25 on Monday, reaching a new all-time high of 165.88. The January contract is now discount to the current index. Technical indicators are in a positive mode. We look for overall market direction to remain firm into the 1st qtr of 2014.



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