Schwieterman: Cattle futures turn higher, demand optimism rising

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Corn                                             Estimated Fund Position
Trends
Short Term:Down                     Net Long Futures and Options: -38669
Long Term: Down                     Change: -8000
Overnight Trade: K +2 Z -1 @7:30 AM


We continue to see bull spreading and strong basis in the corn, but no sign of strength. The May and December contracts both made new lows for the move overnight, which, of course, looks bearish on the charts. I would give the May contract a high chance of a rebound due to the fundamentals, but there just doesn’t appear to be any buying enthusiasm. The December contract is particularly bothersome to me and I look for that to test $5.12 soon.

Wheat                                            Estimated Fund Position
Trends
Short Term: Down                       Net Long Futures and Options: -57602
Long Term: Down                        Change: -2000
Overnight Trade: Chicago: K +1 KC: K +2 @7:30 AM


There were numerous record low temperatures across the HRW Belt overnight, but it didn’t provide much boost to the market. We still have a long string of lower highs on the charts that will need to be broken as the first step of any recovery, but we are still far from that happening. On the chart the July KW has good support just above $7.30 and there are numerous resistance levels from $7.45 to $7.55. The bulls need a close above $7.55 this week.

Soybeans                                        Estimated Fund Position
Trends
Short Term: Up                              Net Long Futures and Options: 36225
Long Term: Down                          Change: -4000
Overnight Trade: K +3 X Unch @7:30 AM


There is still a great deal of bull spreading in the soybeans. Basis levels are still improving at many locations, which says very clearly that futures are too low. On the charts the May contract still needs to close back above $14.30 to really scare the bears, and meanwhile the November soybeans look a lot like the December corn, which is hopeless.

Live Cattle
Trend
Short Term: Down
Long Term: Down
Opening Calls: 50-70 Higher


Live cattle futures closed steady to moderately higher on Tuesday and are showing moderate gains in overnight trade. Cutout values were firmer on Tuesday, with demand optimism rising as the temps are expected to do the same. June is starting to form an attractive bottom formation on the daily bar chart but will need a close above the 122.25 level to garner any longer term support. Cash trade is likely a day or two away, unless packers suddenly show up with $127 or better in the south.

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


Feeder cattle futures posted triple digit gains in all but the expiring April contract on Tuesday. The feeder rally comes on the back of a sharp break in the corn market over the past three days. Deferred feeders have been especially weak, as they look to new contract lows in December corn for support. Ideas that fourth quarter corn prices could drop more than$1.50-$2.00 per bushel from current levels has injected optimism back into the futures market. Cash sales are picking up modestly but nothing like the board at this time.



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