Schwieterman: Climbing corn values slam cattle futures

Corn                                      Estimated Fund Position
Trends
Short Term: Up                  Net Long Futures and Options: 100837
Long Term: Up                   Change: +8000
Overnight Trade: H +2 @7:30 AM

The March corn closed above the 50-day moving average for the first time in over a month and is now testing the resistance at the 62% retracement of the last move down. It is looking more and more likely that we will see the market test the $7.67 area in the near term. It would, of course, make the process go fast if we saw better export sales, but right now I think the bulls are content looking at the strong basis levels and tight ending stocks projections.

Wheat                                   Estimated Fund Position
Trends
Short Term: Up                   Net Long Futures and Options: -51329
Long Term: Down              Change: +6000
Overnight Trade: Chicago: H +5 KC: H +4 @7:30 AM

The March KW has found resistance at the $8.45 area which is the 38% retracement of the last move down. The job of the wheat market is to stay out of the feed mix and maintain a comfortable stocks level to compensate for what could be another horrible wheat crop. A close above $8.45 will make $8.63 and $8.81 the next upside objectives.

Soybeans                             Estimated Fund Position
Trends
Short Term: Up                   Net Long Futures and Options: 32466
Long Term: Down              Change: -5000
Overnight Trade: H +8 @7:30 AM

The beans failed to hold gains yesterday and closed in the lower half of the trading range, but the market is trying to make up for that today. The Chinese are active in the market due to the strong crush margins and the US crush pace is very strong as well. USDA is probably understating demand and overstating ending stocks and we will probably have very, very tight supplies this summer. $14.44 is the next objective for the March contract.

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

Live cattle futures posted a mixed close on Tuesday, with February modestly higher, while deferred contracts closed moderately lower. Front end supplies continue to be sufficient, with weights running well above year ago levels. Overnight lows in the February have tested Tuesday’s lows, but at this time they have held. A penetration of those lows should lead to a quick test of the early November lows. Cash trade is likely to wait until at least Thursday, with bids and asking prices at least 4.00 apart.

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

Feeder cattle futures posted triple digit losses on Tuesday, as climbing corn values continue to weigh on the cash and futures. The 150.00 level in the March feeders becomes the new support level, with overnight lows reaching 150.10. Corn is trading firmer once again, with overnight highs taking out Tuesday’s high for the move. Open interest is being trimmed daily on this selloff. Cash index levels dipped below the 150.00 level on Tuesday.

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