Schwieterman: Feeder cattle futures feed on falling corn

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Corn                                     Estimated Fund Position
Trends – December Contract
Short Term:Down                 Net Long Futures and Options: -210991
Long Term: Down                 Change: -4500
Overnight Trade: Z -1 @7:30 AM


December corn made another new low for the move overnight and the market is continuing to work down towards the $4.25 area. Yield reports are generally good and there is fear of an ending stocks estimate above 2 billion in the October supply and demand report, so it will be difficult to rally this market until we get that report out of the way. Oddly enough, maybe it will be the wheat market that has to support the corn this year.

Wheat                                  Estimated Fund Position
Trends – December Contract
Short Term: Up                    Net Long Futures and Options: -61219
Long Term:Up                      Change: +2000
Overnight Trade: Chicago: Z +2 KC: Z +3 @7:30 AM


The December KW made another new high for the move overnight and that market appears to be headed to the $7.54 area and then possibly to $7.70. Bull spreads have been working well and the December contract is now trading about 3 cents over the March, which is a very good indication of solid up front demand. Bull spreading in a bull market is bullish. That may seem redundant, but I’m trying to get a point across.

Soybeans                             Estimated Fund Position
Trends – November Contract
Short Term: Down               Net Long Futures and Options: 81218
Long Term: Down                Change: -6000
Overnight Trade: X +7 @7:30 AM


Soybeans were firmer overnight and the November contract almost has a double bottom just above the 62% retracement, so I am looking for a rebound back towards $12.95 this week. Yield reports are causing fears of a higher yield estimate in the October report, which would add to the bearishness of the market. Demand has been strong, but we probably won’t have an export sales report this week to show us what we have sold, we won’t have much bullish information this week. Of course we might not have a supply and demand report either, so plan on flying blind for a while.

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


Live cattle futures closed lower on Tuesday, with the October contract taking the brunt of the sell pressure. The uncertainty of the government shutdown along with impending first notice for delivery after the close on Monday inspired some liquidation of the October. Deferred contracts were mixed to mostly lower but appear to have found a bit of a bid in overnight trade. The large premium in deferred live cattle contracts should promote hedges out of the October and into those months.  October remains a 1.30 premium to last weeks’ southern cash trade.

Feeder Cattle
Trends
Short Term: Up
Long Term: Up
Opening Call: 10-30 Higher


Feeder cattle futures continued to feed off the new lows in the corn market, posting triple digit gains again on Tuesday. Front months saw more modest gains than the deferred contracts, as the market anticipates even lower corn values down the road. Overbought conditions continue in this market, which will likely provide a setback from these historic levels. Overnight prices are modestly higher, with corn near steady.



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